September 26, 2019 / 8:12 PM / 21 days ago

EMERGING MARKETS-Latam FX down, Mexican peso extends slide after rate cut

 (Adds Mexico central bank decision, analyst comment; updates
prices)
    By Susan Mathew
    Sept 26 (Reuters) - Latin American currencies fell against a
slightly firmer dollar on Thursday, with the Mexican peso down
after an expected interest rate cut by the Mexican central bank.
    The peso extended its decline to a second day, down
0.3% after touching a three-week low during the session.
Mexico's main stock index dipped 0.2%.
    The country's central bank cut the benchmark interest rate
by 25 basis points for a second time this year, to 7.75%. It
cited slowing inflation and widening slack in the economy, but
forecast a slight recovery over the rest of the
year.
    "It's bit on the dovish side, which means there are more
cuts ahead, which is reasonable," said Win Thin, global head of
emerging market currency strategy at Brown Brothers Harriman.
    Data earlier in the day showed the economy contracted at the
start of the third quarter.
    "The danger is that they cut too fast. If the central bank
is perceived as cutting rates too aggressively, I think peso
will come under pressure," added Thin.
    The cut came a day after Mexican markets were knocked by
uncertainty regarding U.S. ratification of Mexico's trade deal
with Canada and United States. U.S. House Speaker Nancy Pelosi
affirmed On Thursday that the House of Representatives is moving
ahead with the deal.
    Other Latam currencies also fell, with the dollar index
, which measures the greenback against six major rivals,
up 0.1%. Brazil's real slipped 0.3%, while Colombia's
peso gave up half a percent. 
    Brazil's central bank raised its 2019 economic growth
forecast slightly but warned that the outlook remains tinged
with a "high degree of uncertainty."
    BBH's Thin expects the dollar's strength to sustain and 
pressure emerging market currencies. 
    Given the current state of the U.S. economy, with economic
growth being revised up and inflation rising, markets have
ticked back their expectations of policy easing by the U.S.
Federal reserve, he says, which is positive for the dollar.
    "Markets should be a little less worried about recession and
a little more about inflation."
    Stocks in the region were mixed. Chile stocks
rose, as did Brazil's Bovespa index, which climbed 0.8%.
    Shares of Brazil's state oil firm Petroleo Brasileiro
 gained 1% after it doubled down on its oil
and gas strategic plan.
    Planemaker Embraer, however, slipped to the
bottom of the index after it said the European Commission
indicated it intends to open an in-depth investigation of
Boeing's bid for a controlling stake in Embraer's
commercial aircraft arm.
    Shares in Colombia were flat, while Argentina
 fell. The moves were in line with the sluggishness in
U.S. stocks.
    
    Key Latin American stock indexes and currencies at 1951 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1008.89      0.33
                                        
 MSCI LatAm                    2684.35      0.71
                                        
 Brazil Bovespa              105271.81      0.76
                                        
 Mexico IPC                   42940.71     -0.17
                                        
 Chile IPSA                    5026.19       0.4
                                        
 Argentina MerVal             28165.99    -0.165
                                        
 Colombia IGBC                13008.94         0
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.1612     -0.20
                                        
 Mexico peso                   19.6355     -0.37
                                        
 Chile peso                      725.9      0.08
                                        
 Colombia peso                 3443.75     -0.45
 Peru sol                        3.382     -0.95
                                        
 Argentina peso                57.2100     -0.24
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Dan
Grebler)
  
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