July 28, 2020 / 3:07 PM / 14 days ago

EMERGING MARKETS-Latam FX retreats, Colombian peso hits 1-month low on oil weakness

    * Colombian peso touches lowest level since July 1
    * Oil prices weaken as U.S. fiscal package faces tough talks
    * Latam will be poorer after the pandemic - IADB president 

    By Shreyashi Sanyal
    July 28 (Reuters) - The Colombian peso touched its lowest
level in nearly one month on Tuesday as the oil exporter's
currency was pressured by weakening crude prices after talks for
a coronavirus aid package in the United States stalled. 
    The peso fell 1.3% against the dollar, after rising
in the previous session. Local investors also eyed a central
bank policy meeting at the end of the week, with expectations of
a 25-basis-point cut to the key lending rate. 
    Oil prices, along with stocks around the world weakened as
U.S. congressional Republicans and Democrats faced difficult
talks on how best to recover from the coronavirus pandemic,
after Republicans unveiled a $1 trillion aid package on Monday.

    Most currencies in Latin America weakened as the dollar
bounced off two-year lows, but analysts expect further weakness
in the greenback on rising bets that the U.S. Federal Reserve
will maintain very loose monetary policies at the end of its
two-day meeting on Wednesday. 
    "Fed officials have made clear that they will be making
their forward guidance more dovish and outcome-based soon,"
analysts said in a TD Securities client note. 
    "We don't expect those developments until after the
September meeting, but the (Fed) chairman is likely to continue
the process of prepping markets for changes this week."
    Brazil's real dipped 0.5% against the dollar. Data
showed Brazil posted a current account surplus in June for the
third straight month, the first time this has happened since
2007, and attracted portfolio inflows for the first time since
before the onset of the coronavirus pandemic.
    Most currencies in Latin America have performed relatively
better than their emerging market peers, with analysts pointing
to their commodity-linked nature and having China as a major
trading partner. 
    Improving economic indicators in the world's second largest
economy have helped shore up demand for agricultural products
and metals, two of Latin America's main exports to China.   
    As coronavirus cases spike in Latin America, Inter-American
Development Bank President Luis Alberto Moreno said the region
will emerge from the pandemic with higher poverty rates as
efforts to control the virus lead to spikes in unemployment and
indebtedness.
    Mexico's peso fell 0.3% as its economy is expected to
contract at historic levels of 17.7% in the second quarter,
according to a Reuters poll of analysts.     
    The Argentine peso was flat as the country's main creditors
said on Monday their latest debt restructuring proposal has
support from investors holding more than half the country's
foreign debt, bolstering their case for countering the
government's most recent offer. 
    Key Latin American stock indexes and currencies;
     Stock indexes                 Latest      Daily % change
 MSCI Emerging Markets                1081.51             0.78
                                               
 MSCI LatAm                           2104.93            -0.62
                                               
 Brazil Bovespa                     104145.52            -0.32
                                               
 Mexico IPC                          37654.32            -0.23
                                               
 Chile IPSA                           4061.20            -0.04
                                               
 Argentina MerVal                    49153.67           -0.599
                                               
 Colombia COLCAP                      1177.66            -0.26
                                               
                                                              
         Currencies                Latest      Daily % change
 Brazil real                           5.1781            -0.41
                                               
 Mexico peso                          21.9500            -0.16
                                               
 Chile peso                             766.4             0.13
                                               
 Colombia peso                        3716.95            -1.32
 Peru sol                               3.508             0.00
                                               
 Argentina peso (interbank)           72.1300            -0.07
                                               
 Argentina peso (parallel)                130             4.62
                                               
 
 (Reporting by Shreyashi Sanyal in Bengaluru; editing by
Jonathan Oatis)
  
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