August 23, 2018 / 3:04 PM / 9 months ago

EMERGING MARKETS-LatAm currencies turn lower as U.S.-China trade war escalates

    By Bruno Federowski
    BRASILIA, Aug 23 (Reuters) - Latin American currencies
snapped a string of gains on Thursday after a new round of U.S.
and China trade tariffs kicked in, escalating a months-long
trade war.
    The United States and China implemented punitive 25 percent
tariffs on $16 billion worth of each other's goods, deterring
investors from risky, high-yielding assets.
    Investors fear trade frictions between the world's top two
economies could spill over and damage shaky growth in emerging
market economies, driving them to seek refuge in the U.S.
    Currencies from Mexico, Chile, Colombia
 and Peru slipped between 0.3 and 0.7 percent.
    The move bucked a recent upward trend in emerging-market
currencies after U.S. President Donald Trump criticized the U.S.
Federal Reserve's interest rate hikes earlier this week in an
interview with Reuters.
    Minutes from the Fed's last policy meeting, published on
Wednesday, hinted at a September rate hike, as largely expected.
    The Brazilian real, which has underperformed other
regional currencies in recent weeks as it plummeted to a 2-1/2
year low, fell for a seventh straight day. But losses were
somewhat limited as some traders went bargain-hunting.
    "There's a small technical correction going on but no one is
willing to short the dollar. There's no room for large gains in
the current news environment," said José Faria Júnior, head of
Wagner Investimentos.
    A recent string of voter intention polls has shown
market-favorite Geraldo Alckmin failing to gather steam ahead of
October's presidential elections. Jailed former President Luiz
Inácio Lula da Silva and far-right lawmaker Jair Bolsonaro have
consistently led the race.
    Key Latin American stock indexes and currencies at 1435 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
 MSCI Emerging Markets              1050.61      0.6    -9.31
 MSCI LatAm                         2505.54     0.52   -11.41
 Brazil Bovespa                    76494.43    -0.53     0.12
 Mexico IPC                        50000.25     0.24     1.31
 Chile IPSA                         5283.30     0.17     0.17
 Argentina MerVal                  27024.80     0.67   -10.11
 Colombia IGBC                     12148.92    -0.11     6.84
 Currencies                                  daily %    YTD %
                                              change   change
 Brazil real                         4.0705    -0.39   -18.60
 Mexico peso                        18.8640    -0.73     4.43
 Chile peso                           664.6    -0.47    -7.52
 Colombia peso                      2979.51    -0.69     0.08
 Peru sol                             3.293    -0.27    -1.70
 Argentina peso (interbank)         30.1200     0.43   -38.25
 Argentina peso (parallel)            30.55     0.65   -37.05
 (Reporting by Bruno Federowski;
Additional reporting by Claudia Violante in São Paulo; Editing
by Dan Grebler)
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