May 16, 2019 / 9:41 PM / 2 months ago

EMERGING MARKETS-Latam FX falls, Mexican peso, Brazil's real in focus

 (Updates prices, adds market strategist's quote)
    By Aaron Saldanha
    May 16 (Reuters) - Most Latin American currencies weakened
on Thursday against the dollar, with Mexico's peso in focus
following the release of the central bank's outlook, while
Brazil's real skidded on growth fears.
    Mexico's peso softened 0.4% after Banco de Mexico
(Banxico) matched most investors' expectations by leaving
borrowing costs at 8.25%. The bank cited possible pressure on
the peso's exchange rate as a risk for inflation to
quicken.
    More broadly, MSCI's index of Latin American currencies
 eased 0.2%, while MSCI's Latin American stocks
index was 1.3% lower, after hitting a 2019 low.
    "Banxico believes the near term pickup in inflation is
transitory, but its focus on wage increases and cost pressures
implies a high level of vigilance and little room to cut rates
in 2019," Sacha Tihanyi, TD Securities' deputy head of emerging
markets strategy, wrote in a note.
    Also on Thursday, Mexican President Andres Manuel Lopez
Obrador said Mexico received $10 billion in foreign direct
investment in the first quarter of 2019, seeking to allay doubts
about his economic management and fears over a potential ratings
downgrade. 
    Mexican stocks rose 0.2%, largely on gaining
financials.
    Brazil's real dived 1.1% to a more than seven month
closing low, while yields on local 10-year bonds
rose 11 basis points to 9.01%.
    Investor sentiment towards Brazil chilled as central bank 
president Roberto Campos Neto acknowledged there is a "relevant
probability" the economy contracted slightly in the first
quarter.
    He also said controlling inflation hinged on the approval
and implementation fiscal reforms, with markets delaying
investment until uncertainty reduces.
    Bank of America Merrill Lynch economists cut their Brazilian
growth forecasts and changed their interest rate call to predict
aggressive policy easing this year.    
    Sao Paulo-traded stocks slid 1.8%, weighed down by
losses among financials and materials, as they neared the point
at which they began the year. 
    Mining firm Vale SA reversed early gains to slide
3.2%. It told prosecutors in the state of Minas Gerais a dam is
at risk of rupturing at its Gongo Soco mine, not far from where
another of its dams collapsed in January, resulting in the
deaths of more than 230 people.
    Argentina's peso firmed, while stocks tacked
on 2%. 
    
    Latin American stock indexes and currencies at 2100 GMT
    
 Stock indexes                            daily
                                              %
                               Latest    change
 MSCI Emerging Markets          1011.15   -0.47
                                         
 MSCI LatAm                     2553.00   -1.33
                                         
 Brazil Bovespa                90024.47   -1.75
 Mexico IPC                    43442.49    0.24
 Chile IPSA                     4977.75   -0.55
                                         
 Argentina MerVal              33892.17    2.03
                                         
 Colombia IGBC                 12275.61    0.22
                                         
                                               
 Currencies                               daily
                                              %
                                         change
                                 Latest  
 Brazil real                     4.0450   -0.22
                                         
 Mexico peso                    19.1190   -0.38
                                         
 Chile peso                       693.7   -0.42
                                         
 Colombia peso                   3297.5   -0.45
 Peru sol                         3.317    0.00
                                         
 Argentina peso (interbank)     44.7300    0.60
                                         
 

 (Reporting by Aaron Saldanha in Bengaluru; editing by Grant
McCool)
  
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