July 14, 2020 / 3:03 PM / 21 days ago

EMERGING MARKETS-Latam FX slides on coronavirus risks, U.S.-China tensions

    By Shreyashi Sanyal
    July 14 (Reuters) - Most currencies in Latin America
weakened on Tuesday, as a rise in COVID-19 cases globally and a
flare-up in U.S.-China tensions kept investors away from riskier
bets, even as data showed signs of economic improvement in
Brazil.
    Risk appetite was sparse in global equity markets after a
reintroduction of coronavirus restrictions in the U.S. state of
California also took the shine off encouraging earnings reports
from big banks on Wall Street.
    COVID-19 cases continued to spike in South America and
elsewhere globally. A Reuters count on Monday showed the number
of deaths from the coronavirus in Latin America had exceeded the
figure for North America, for the first time since the start of
the pandemic.
    Simmering geopolitical tensions between the United States
and China also hit sentiment after the United States rejected
China's claims to offshore resources in most of the South China
Sea.
    The MSCI's index for Latin American currencies
 shed 1.2% while its stocks counterpart 
 slipped 1.5%, putting both indexes on track for
their worst one-day percentage fall in nearly three weeks. 
    Brazil's real tumbled 0.7% against a firmer dollar,
even as data showed economic activity in Latin America's largest
economy began to grow again in monthly terms in May, after two
sharp consecutive declines in March and April, as businesses
slowly began to reopen.  
    Most currencies in the regions have regained some lost
ground from a steep sell-off, but higher dollar demand and
loosening monetary policy have pressured Latin American
currencies. But commodity-linked currencies have outperformed in
recent weeks tracking some improvement in raw material prices.
    The Chilean peso tracked a decline in copper prices
on Tuesday, while oil-exporter Colombia's peso mirrored a
slide in crude prices. 
    Investors also awaited a policy statement from the Chilean
central bank on Wednesday, which will likely show the benchmark
interest rate being held at 0.5% in July.  
    Mexico's peso, however, rose 0.4% against the dollar.
Analysts have said that recent economic data from the country
has suggested that the worst is likely over but cautioned that
economic activity remains limited as the virus is still
spreading rapidly in the country. 
    "The government is sticking to its austerity course and is
offering only little financial aid to the economy," analysts at
Commerzbank wrote in a client note.
    "Against this background, the economic recovery is likely to
be very slow."      
    Key Latin American stock indexes and currencies;
    
 Stock indexes          Latest       Daily % change
 MSCI Emerging             1055.46              -1.48
 Markets                            
 MSCI LatAm                1927.21              -1.54
                                    
                                    
 Brazil Bovespa           98552.04              -0.15
                                    
 Mexico IPC               35982.93              -1.12
                                    
 Chile IPSA                4104.49              -0.26
                                    
 Argentina MerVal         43160.94             -0.176
                                    
 Colombia COLCAP           1139.98              -0.45
                                    
                                                     
    Currencies          Latest       Daily % change
 Brazil real                5.4223              -0.65
                                    
 Mexico peso               22.6130               0.66
                                    
 Chile peso                    787               0.24
                                    
 Colombia peso             3641.22              -0.81
                                    
 Peru sol                   3.4998              -0.09
                                    
 Argentina peso            71.2900              -0.07
 (interbank)                        
                                    
 Argentina peso                123               3.25
 (parallel)                         
                                    
 

 (Reporting by Shreyashi Sanyal in Bengaluru)
  
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