February 28, 2020 / 8:45 PM / a month ago

EMERGING MARKETS-Latam FX to end second week lower, Mexican peso hit by first virus case

    * Latam FX index touches near 18-month low  
    * Mexico second country in Latam to register the virus
    * Mexican peso hits lowest level in almost 6 months
    * Brazil's real slips to new low
    * Chilean peso hits three-month low

 (Updates prices, adds comments)
    By Susan Mathew and Shreyashi Sanyal
    Feb 28 (Reuters) - An index for Latin American currencies
was set to end its second consecutive week in the red on Friday,
with Mexico's peso leading declines as it became the second
country in the region to register first cases of the
fast-spreading coronavirus. 
    The peso fell 1.2% and touched a near six-month low
of 19.8950 per dollar, as Mexico confirmed two cases. This comes
just days after the central bank cut its 2020 economic growth
forecast and hiked its inflation view on virus uncertainty.
     
    The currency is on track to end the week with losses of
around 4% - its worst in more than three years. 
    Adding to Mexico's woes, state oil company Petroleos
Mexicanos on Thursday said its net loss doubled in 2019. The
heavily indebted company has prompted downgrade warnings for
itself as well as Mexican sovereign ratings, with Fitch last
year downgrading Pemex debt to junk.
    MSCI's index for Latin American currencies
fell 0.4%, touching its lowest level since early September 2018.
Its stocks counterpart is set for its worst week
in 11-1/2 years and steepest monthly fall since May 2018.   
    Markets worldwide have been caught in a rout this week with
pandemic fears heightening as the numbers of new infected cases
around the world surpassed those within mainland China, where
the outbreak originated late in December.

    "There will be serious damage to the global economy that may
extend well beyond Q1 if global supply chains are paralyzed for
an extended period of time," said Piotr Matys, senior emerging
markets FX strategist at Rabobank. 
    But Matys also noted a mixture of accommodative monetary
policy and fiscal measures should prove sufficient to boost
appetite for risky assets. 
    Latam's first coronavirus case was confirmed in Brazil
earlier this week and the subsequent rout in Brazil assets led
to two major Wall Street banks cutting the economic growth
forecast for the country, which was already struggling with
flailing fundamentals.
    A report on Friday said Brazil's government is likely to cut
its 2020 gross domestic forecast before the end of next week. A
major commodity exporter, Brazil faces the risk from falling
demand and prices of commodities.
    Brazil's real currency slipped to new lows for a
third straight day.  
    Chile's peso slipped to three-month lows, but data
showing Chilean manufacturing and copper output rose in January 
helped cap declines in the currency of the world's largest
producer of the red metal.
    
    Key Latin American stock indexes and currencies at 2033 GMT:
    
   Stock indexes            Latest      Daily %
                                        change
 MSCI Emerging Markets       1005.56        -2.44
                                      
 MSCI LatAm                  2405.35        -0.88
                                      
 Brazil Bovespa            102900.81        -0.08
                                      
 Mexico IPC                 41284.22        -0.78
                                      
 Chile IPSA                  4122.63         -3.3
                                      
 Argentina MerVal           34973.18        -1.17
                                      
 Colombia COLCAP             1536.69        -1.28
                                      
                                                 
      Currencies            Latest      Daily %
                                        change
 Brazil real                  4.4786         0.03
                                      
 Mexico peso                 19.7010        -0.98
                                      
 Chile peso                    821.1        -0.78
                                      
 Colombia peso                  3523        -0.70
                                      
 Peru sol                      3.453        -0.58
                                      
 Argentina peso              62.2075        -0.11
 (interbank)                          
                                      
 
 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Diane Craft)
  
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