July 27, 2020 / 7:53 PM / 11 days ago

EMERGING MARKETS-Latam FX capitalize on dollar weakness, Mexican peso at 6-week high

 (Updates prices)
    By Shreyashi Sanyal and Susan Mathew
    July 27 (Reuters) - Mexico's peso rose to a near six-week
peak on Monday, with most other Latin American currencies
gaining on the back of a weakening dollar on concerns about the
U.S. economy. 
    The peso firmed 1.4% against the dollar. Data on
Monday showed Mexico posted a record trade surplus in June as
business activity began recovering from months of lockdown, but
exports remained well below 2019 levels.
    The dollar index hit an over two-year low due to the 
surging number of U.S. COVID-19 cases, expectations of a more
accommodative policy stance from the Federal Reserve, and
deteriorating U.S.-China relations. 
    Brazil's real rose 0.9% with a central bank survey
showing the outlook for Brazil's economy improved for the fourth
week in a row. Economists now expect Latin America's largest
economy to shrink by 5.8% this year.        
    "In Brazil, short-term news flow seems to be improving:
macro data has been surprising positively, virus momentum is
slowing and tax reform negotiations are underway," said FX
strategists at JP Morgan. 
    The Colombian peso snapped a three-day losing streak,
with local investors eyeing an interest rate decision. Analysts
expect the central bank to cut by 25 basis points at a policy
meeting on Friday. 
    But the mood was still not entirely "risk-on," as
coronavirus cases spiked around the region.
    For the first time, cases in Latin America surpassed the
combined infections in the United States and Canada, a Reuters
tally showed on Sunday, amid a surge in Brazil, Mexico, Peru,
Colombia and Argentina.
    The Argentine peso retreated after the government
reaffirmed on Saturday that it would not budge from its latest
proposal to restructure $65 billion in debt, but signaled it
would be willing to negotiate on the fine print around the deal.

    Regional stock indexes tracked gains on Wall
Street.
    Brazil's Bovespa rose 1.8% on a materials and
financials boost, while Mexico's Ipc index hit a
three-week high, with cement producer Cemex
jumping 9%. 
    The company reported a quarterly loss but said sales in the
United States increased. Its Latam subsidiary reported a profit
for the second quarter compared with a loss a year ago.

    
    Key Latin American stock indexes and currencies at 1934 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1073.47     1.23
                                   
 MSCI LatAm               2116.70     2.75
                                   
 Brazil Bovespa         104225.09      1.8
                                   
 Mexico IPC              37714.55     0.96
                                   
 Chile IPSA               4062.19     1.18
                                   
 Argentina MerVal        49384.64    1.604
                                   
 Colombia COLCAP          1177.68     0.32
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.1593     0.90
                                   
 Mexico peso              22.0029     1.16
                                   
 Chile peso                 768.5     0.64
                                   
 Colombia peso            3673.36     0.51
                                   
 Peru sol                   3.508     0.74
                                   
 Argentina peso           72.0700    -0.24
 (interbank)                       
                                   
 
 (Reporting by Shreyashi Sanyal in Bengaluru
Editing by Sonya Hepinstall)
  
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