March 4, 2020 / 2:25 PM / a month ago

EMERGING MARKETS-Latam FX firm against recovering dollar

    * Mexican peso jumps more than 1%
    * Brazil GDP shows 2019 growth slowed, 2020 looks weak
    * Brazil Feb service PMIs expand at slowest pace in 8 months
    * Rising oil prices lift Colombian peso

    By Susan Mathew
    March 4 (Reuters) - Latin American currencies firmed on
Wednesday, with Mexico's peso jumping more than 1%, a day after
the U.S. Federal Reserve delivered a surprise interest rate cut
to help counter the economic impact from the coronavirus
outbreak. 
    Regional currencies had rallied on Tuesday after the Fed cut
rates by 50 basis points in an off-schedule move, but they ended
lower as the move stoked fears that the extent of the economic
fallout might be far more than anticipated and that regional
central banks might follow suit.
    But in line with broader emerging market peers, Latam
currencies firmed on Wednesday against a recovering dollar.

    Edward Glossop, a Latin America economist at Capital
Economics, attributed the rally to higher appeal for EM
currencies, given wider interest rate differentials after the
rate cut, as well as rebounding commodity prices.
    Oil exporter Colombia's peso firmed half a percent as
crude prices rose on hopes that OPEC would cut output, while
Chile's peso firmed 0.4% as copper prices rose. Chile is
the world's largest producer of the red metal and the currency
tends to track its prices.
    Mexico's peso firmed up to 1.4%. 
    Mexico's plans to speed up public spending and is urging the
private sector to boost investment to counter the impact of the
coronavirus outbreak, Finance Minister Arturo Herrera said on
Tuesday, adding that the government is working closely with Bank
of Mexico to coordinate a suitable response.
    Brazil's real marked a fresh all-time low in volatile
trading. The currency was last at 4.518 to the dollar. 
    Data on Wednesday showed growth in Brazil's economy slowed
last year with momentum pointing to a weak 2020, while a
separate survey showed the country's dominant services sector
expanded at its slowest pace in eight months in February.
    
    An official from Brazil's economy ministry on Wednesday said
the government would lower the country's 2020 growth forecast on
March 12, but not below a politically sensitive 2%. 

    As the Fed move sent other central banks scrambling to take
appropriate action, speculation is rife that Brazil's central
bank will cut interest rates by 25 basis points to a new low of
4%. The bank had cut four times last year and once this year. 
    Stocks in Brazil and Chile rallied
strongly, in line with U.S. futures.
    IRB Brasil Resseguros' 25% slump was the most on
Sao Paulo's main index after Berkshire Hathaway denied
media reports that it was a shareholder in the Brazilian
reinsurer.
    
    Key Latin American stock indexes and currencies at 1400 GMT:
   Stock indexes            Latest    Daily %
                                      change
 MSCI Emerging Markets       1035.74     0.77
                                      
 MSCI LatAm                  2489.41     -0.3
                                      
 Brazil Bovespa            106593.78        1
                                      
 Mexico IPC                        -        -
                                      
 Chile IPSA                  4349.47      1.4
                                      
 Argentina MerVal                  -        -
                                      
 Colombia COLCAP                   -        -
                                      
                                             
       Currencies           Latest    Daily %
                                      change
 Brazil real                  4.5222    -0.27
                                      
 Mexico peso                 19.3330     0.59
                                      
 Chile peso                    810.8    -0.46
                                      
 Colombia peso               3440.95     0.59
 Peru sol                     3.4127     0.29
                                      
 Argentina peso              62.3500    -0.06
 (interbank)                          
                                      
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Bernadette
Baum)
  
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