June 10, 2019 / 2:21 PM / 2 months ago

EMERGING MARKETS-Mexican peso rises on U.S. deal to avert tariffs

    By Sruthi Shankar
    June 10 (Reuters) - The Mexican peso was on track to post
its biggest percentage gain this year on Monday, outperforming
its Latin American peers after the country struck a migration
deal with the United States to avoid higher tariffs on its
exports.
    The peso, which has shed more than 2.5% since U.S.
President Donald Trump's threat last month to impose 5% levies
on all Mexican goods from Monday, was last up about 2%.
    Worries that Latin America's second-largest economy could
slip into a recession if Trump made good on his promise to
impose tariffs have sent shivers through financial markets
already reeling from a U.S.-China trade dispute.
    Mexico on Friday agreed to rapidly expand a controversial
asylum program and deploy security forces to stem the flow of
illegal Central American migrants.
    "The market will likely take MXN back to at least the close
on May 30, the level it traded before President Trump first
tweeted about the tariffs," Dirk Willer, head of emerging market
strategy at Citi Research, wrote in a note.
    "Given that EMFX has appreciated about 1% since May 30, we
would expect the MXN to appreciate more from here."
    Mexican stocks gained 0.6%. 
    Brazil's real dipped against a firm dollar on worries
about yet another setback for the country's pension reforms.

    Those concerns also hit the banking sector, sensitive to
headlines on pension reforms, with Banco Bradesco SA
and Itau Unibanco falling almost 2%.
    Chile's peso declined more than half a percent after
its central bank unexpectedly cut the benchmark interest rate by
50 basis points to 2.5% on Friday as it braced for a sharper
economic slowdown because of the U.S.-China trade dispute.

  
  Key Latin American stock indexes and currencies at 1400 GMT
      
 Stock indexes                        daily %
                             Latest    change
 MSCI Emerging Markets       1020.56     1.31
                                      
 MSCI LatAm                  2731.50    -0.51
                                      
 Brazil Bovespa             96982.47    -0.86
                                      
 Mexico IPC                 43594.20      0.7
                                      
 Chile IPSA                  4982.78     0.64
                                      
 Argentina MerVal                  -        -
                                      
 Colombia IGBC                     -        -
                                      
                                             
 Currencies                           daily %
                                       change
                              Latest  
 Brazil real                  3.8900    -0.34
                                      
 Mexico peso                 19.2372     1.94
                                      
 Chile peso                      697    -0.75
                                      
 Colombia peso                     -        -
 Peru sol                          -        -
                                      
 Argentina peso                    -        -
 (interbank)                          
                                      
 

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Susan Thomas)
  
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