April 23, 2020 / 7:14 PM / 4 months ago

EMERGING MARKETS-Most Latam FX weaken, Brazil's real hits new low

    * Brazilian rate cut bets rise
    * Mexican peso down as inflation slows
    * Historic outflows in Mexico, Brazil shares in recent weeks

 (Updates to close)
    By Ambar Warrick and Susan Mathew
    April 23 (Reuters) - Brazil's real touched fresh all-time
lows on Thursday, and most other Latin American currencies also
weakened as markets mulled over increasingly dire economic
readings due to the coronavirus.  
    The real hit 5.4986, while the Mexican peso
fell to its lowest level in almost three weeks against a
stronger dollar.
    The Brazilian government faces the challenge of providing
stimulus without blowing up the country's budget deficit.
    "Speculation is rampant that the central bank might even cut
its key rate by 75 basis points in early May, which is putting
pressure on the real," wrote Antje Praefcke, FX and EM analyst
at Commerzbank. 
    "The government signaled a recovery plan for the economy,
but national finances remain overstretched, making the real one
of the hardest hit currencies during the crisis. ... That is
unlikely to change significantly short term."
    The real has shed nearly 36% this year, making it one of the
worst performing emerging market currencies.
    A continued, albeit slowing jump in U.S. jobless claims,
coupled with data showing business activity plummeting in the
United States and the euro zone spurred further risk aversion,
pointing to further losses in emerging markets.
    The readings offset optimism over stimulus measures across a
number of developed and developing markets, as governments race
to cushion the economic impact of the coronavirus.
    In Mexico, inflation in the first half of April slowed to
its lowest in more than four years, potentially giving the
central bank more room to trim borrowing costs. 
    The bank had unexpectedly cut rates earlier in the week
after a collapse in oil prices this week added to a list of woes
for the already weak Mexican economy.  
    The Argentine peso hit a record low, while bond
prices fell after the country missed a bond interest payment due
on Wednesday, ramping up fears that it could default on its
sovereign debt.
    Capital flight from Latin America's oil-producing nations is
nearing record levels, with equity and debt markets in Mexico,
Brazil and Colombia experiencing historic outflows in recent
weeks, data from the Institute of International Finance showed.

    Brazil's bovespa index lost 0.3% on the day as banks
and healthcare stocks weighed. The index shaved almost 30% off
last month as the pandemic squeezed risk appetite. 
    Bourses in Chile, Mexico and Colombia
 tracked some strength on Wall Street on Thursday.

    Key Latin American stock indexes and currencies at 1900 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets     891.83     0.36
 MSCI LatAm               1600.75    -1.23
 Brazil Bovespa          80419.04    -0.33
 Mexico IPC              34292.88      0.2
 Chile IPSA               3725.33     1.27
 Argentina MerVal        30409.81   -0.475
 Colombia COLCAP          1141.06     0.73
      Currencies          Latest   Daily %
 Brazil real               5.4872    -1.43
 Mexico peso              24.6770    -0.85
 Chile peso                 858.6    -0.19
 Colombia peso            4022.21     0.00
 Peru sol                  3.3718    -0.03
 Argentina peso           66.3100    -0.12
 (Reporting by Ambar Warrick in Bengaluru
Editing by Alistair Bell and Jonathan Oatis)
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