May 18, 2018 / 9:54 PM / 6 months ago

EMERGING MARKETS-Brazilian real, Mexican peso dip amid selloff

    By Bruno Federowski
    BRASILIA, May 18 (Reuters) - The Brazilian and Mexican
currencies weakened and stocks across Latin America fell on
Friday as a global emerging-market selloff drove many investors
to unwind bets on stronger currencies despite increased central
bank intervention.
    The real fell as much as 2 percent against the dollar
to the weakest since March 2016, before recovering slightly to
close 1 percent lower.
    The currency weakened for a sixth straight day, capping an
11.3 percent decline since the beginning of the year that made
it the second-worst performing currency in Latin America, behind
only the Argentine peso.
    Mexico's peso also fell more than 1 percent against
the dollar as leaders in the United States and Mexico threw cold
water on the prospect of a quick renegotiation of the North
American Free Trade Agreement (NAFTA). The peso and the
benchmark Mexican stock index have now fallen for five
weeks in a row.
    Bets that a wider U.S. fiscal deficit and accelerating
inflation could drive the Federal Reserve to raise interest
rates more than expected have bumped up U.S. bond yields, luring
capital away from higher-yielding emerging-market assets.
    The selloff has extended for weeks, surprising many who were
certain that the rout would fade quickly. A Reuters poll of
foreign exchange strategists earlier this month suggested Latin
American currencies would likely recoup much of their losses in
coming months, though many warned of vulnerabilities in
Argentina and Brazil.
    The currency weakness came even after Brazil's central bank
increased market intervention and unexpectedly refrained from
cutting interest rates this week.
    The move highlights how emerging-market central banks have
struggled to support their currencies. The Argentine peso
weakened around 1 percent on Thursday even as the country's
central bank offered to sell additional dollars. 
    
    Key Latin American stock indexes and currencies at 2100 GMT:
    
 Stock indexes                                  daily %    YTD %
                                                 change   change
                                    Latest               
 MSCI Emerging Markets                1137.75     -0.55    -1.79
 MSCI LatAm                           2701.40     -1.89    -4.48
 Brazil Bovespa                      83081.88     -0.65     8.74
 Mexico IPC                          45666.77     -0.26    -7.47
 Chile IPSA                           5667.86     -0.38     1.86
 Chile IGPA                          28679.66     -0.29     2.50
 Argentina MerVal                    31869.82       0.2     6.00
 Colombia IGBC                       12127.22     -0.51     6.65
 Venezuela IBC                       22947.40      1.98  1716.69
   

 (Reporting by Bruno Federowski
Editing by Susan Thomas and Will Dunham)
  
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