July 27, 2020 / 3:08 PM / 9 days ago

EMERGING MARKETS-Latam FX gains as dollar crumbles, Mexican peso at 6-week high

    By Shreyashi Sanyal
    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 as concerns rose about
the U.S. economy. 
    The peso firmed more than 1% against the dollar,
while the Brazilian real rose 0.3%. 
    Expectations of a more accommodative policy stance from the
Federal Reserve and deteriorating U.S.-China relations also
played into the dollar's weakness.
    Analysts, noted, however that the mood was still not
entirely "risk-on," as coronavirus cases spiked in most regions
of Latin America.
    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 of infections in Brazil,
Mexico, Peru, Colombia and Argentina.
    "Today, risk markets haven't bounced back to form as the
absolute sum of total global case counts is proving to be a hard
pill for investors to swallow to start the week," said Stephen
Innes, chief global market strategist at AxiCorp.
    A central bank survey showed the outlook for Brazil's
economy improved for the fourth week in a row, with economists
expecting Latin America's largest economy to shrink by 5.8% this
year, compared with a 5.95% fall in GDP forecast last week and
6.5% a month ago.     
    Chile's peso strengthened by 0.7% on higher prices of
its main export, copper, as expectations for a recovery in
global demand for the red metal were at play.    
    The Colombian peso also edged higher, with local
investors eyeing a decision on interest rates by the country's
central bank. Analysts expect a cut of 25 basis points at the
end of the policy meeting on Friday. 
    "While the monetary policy committee is likely to maintain
its data-dependent, gradualist tilt in its statement on
Friday... our forecasts anticipate another 25 bps cut at a
subsequent meeting to keep taking the policy rate through record
lows to a terminal rate of 2.00% for this easing cycle,"
analysts at Scotiabank Economics said in a client note.   
    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.

    Most stock indexes in the region opened higher, tracking
gains on Wall Street.    
    Key Latin American stock indexes and currencies;
    
     Stock indexes                Latest     Daily % change
 MSCI Emerging Markets              1072.29            1.11
                                             
 MSCI LatAm                         2106.56            2.26
                                             
 Brazil Bovespa                   103723.53            1.31
                                             
 Mexico IPC                        37382.54            0.07
                                             
 Chile IPSA                         4051.30            0.91
                                             
 Argentina MerVal                  49630.70            2.11
                                             
 Colombia COLCAP                    1180.21            0.53
                                             
                                                           
         Currencies               Latest     Daily % change
 Brazil real                         5.1637            0.82
                                             
 Mexico peso                        21.9900            1.22
                                             
 Chile peso                           765.7            1.01
                                             
 Colombia peso                      3669.68            0.61
 Peru sol                            3.5258            0.23
                                             
 Argentina peso (interbank)         72.0700           -0.24
                                             
 Argentina peso (parallel)              134            3.73
                                             
 

 (Reporting by Shreyashi Sanyal in Bengaluru)
  
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