July 23, 2019 / 8:16 PM / 4 months ago

EMERGING MARKETS-Dollar strength, growth worries hurt Latam currencies

 (Updates throughout, adds market closings)
    By Sruthi Shankar
    July 23 (Reuters) - Latin American currencies weakened on
Tuesday, hurt by a strong dollar after U.S. lawmakers reached a
debt and spending deal, while the International Monetary Fund
slashed its growth estimate for the region by more than half.
    Brazil's real slid as much as 0.95% to touch a
two-week low against the dollar. The currency has tacked on 2%
this month as the government's pension reform bill passed its
first congressional hurdle, although bets that Brazil's central
bank will embark on an aggressive monetary policy easing cycle
at a meeting next week piled pressure on the real.
    Brazil's consumer price index fell to its lowest level in
over a year, increasing expectations of a rate cut.
    "This low print is in line with our economists' view that
the BCB will cut 25bp (basis points) this month, totaling 100bp
for the full cycle," Citi analysts wrote in a note.
    Denting most emerging market currencies, the dollar rose
after President Donald Trump and U.S. lawmakers reached a
two-year deal lifting government borrowing limits to cover
    Investors are looking to the European Central Bank and U.S.
Federal Reserve to confirm their expectations of interest rate
cuts, hopes of which have encouraged capital inflows into
developing world assets this year.    
    Further weakening sentiment, the IMF said Latin America's
economic output is expected to grow 0.6% this year, down from an
expected 1.4% growth forecast in April.
    Mexico's peso was down 0.6%, with President Andres
Manuel Lopez Obrador criticizing the IMF's downgrade and
reiterating that the economy will expand 2% in 2019.

    The Chilean peso and Colombian peso fell
between 0.4% and 0.6%.
    Argentina's peso shed about 0.5%. The IMF in its
report expected a slightly deeper-than-expected recession in
Argentina in 2019 and a slower recovery in 2020.
    Sao Paulo-listed stocks were flat as shares of heavy-weight
miner Vale dropped 1%, tracking a fall in Dalian iron
ore prices, while banks helped limit losses.
    Mexican stocks fell for a sixth straight session and 
hit their lowest level in over seven months, with losses led by
breadmaker Grupo Bimbo after quarterly results.
  Key Latin American stock indexes and currencies at 1948 GMT:
 Stock indexes                Latest      Daily %
 MSCI Emerging Markets           1055.05     0.12
 MSCI LatAm                      2887.55    -0.86
 Brazil Bovespa                103920.71    -0.03
 Mexico IPC                     40946.38    -0.64
 Chile IPSA                      5000.51    -0.63
 Argentina MerVal               39245.24     1.33
 Colombia IGBC                  13017.54     0.55
 Currencies                       Latest  Daily %
 Brazil real                      3.7717    -0.91
 Mexico peso                     19.1821    -0.68
 Chile peso                          693    -0.63
 Colombia peso                      3187    -0.35
 Peru sol                          3.295    -0.30
 Argentina peso (interbank)      42.6650    -0.48

 (Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru;
Editing by Rosalba O'Brien)
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