August 31, 2017 / 11:15 PM / a year ago

EMERGING MARKETS-Mexico's peso slips ahead of second NAFTA negotiation round

 (Updates with final data)
    By Bruno Federowski
    SAO PAULO, Aug 31 (Reuters) - Mexico's peso fell on Thursday
amid threats by U.S. President Donald Trump to abandon the North
American Free Trade Agreement (NAFTA) in the run-up to a second
round of talks to update the accord.
    The currency slipped nearly 1 percent against the
dollar, a day before negotiators meet in Mexico City on Friday
to try and advance reworking the 23-year-old deal.
    "The foreign exchange market is awaiting the second round of
(NAFTA) negotiations starting this Friday in Mexico for more
information about the future of the accord," lender Banco Base
said in a note to clients.
    Trump has used Twitter, press conferences and speeches to
attack NAFTA in recent days, a move Mexican and Canadian
officials regard as a negotiating strategy to wring concessions,
but which has heightened uncertainty over the trade deal.
    Elsewhere, Chile's peso and the Brazilian real strengthened
as strong Chinese industrial figures lifted metal prices.
    Growth in China's manufacturing sector unexpectedly
accelerated in August, suggesting the world's second-largest
economy is still expanding at a healthy clip.
    The data fueled bets on strong demand for basic metals,
lifting prices of major Latin American exports such as iron ore
and copper. That provided a further boost to the Chilean peso's
 recent rally, driving it near two-year highs.
    "The Chilean peso has been on a tear, boosted by rising
copper prices," strategists at Brown Brothers Harriman wrote in
a report. "We think the copper rally is overdone, but the growth
outlook has improved, while political uncertainty may pick up as
November elections approach."
    Political uncertainty increased on Thursday after Chilean
Finance Minister Rodrigo Valdes resigned, citing differences
over economic policy with members of President Michelle
Bachelet's center-left coalition government.
    Some saw Valdes' resignation, ahead of the November
presidential and parliamentary elections, as a blow to the
center-left and its presidential candidate, Alejandro Guillier,
a senator who is most closely tied to Bachelet's coalition.
    Brazil's real strengthened 0.6 percent in volatile
trading as investors tried to influence a benchmark foreign
exchange rate calculated at the last trading day of each month.
    Key Latin American stock indexes and currencies at 2305 GMT:
 Stock indexes                                 daily %   YTD %
                                      Latest    change  change
 MSCI Emerging Markets                1087.70    -0.03   26.14
 MSCI LatAm                           2873.10     0.22   22.75
 Brazil Bovespa                      70835.05    -0.07   17.61
 Mexico S&P/BVM IPC                  51210.48     0.03   12.20
 Chile IPSA                           5153.15    -0.06   24.13
 Chile IGPA                          25726.70    -0.02   24.08
 Argentina MerVal                    23588.98     0.41   39.43
 Colombia IGBC                       11048.63     1.55    9.09
 Venezuela IBC                      235413.91     4.41  642.51
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                           3.1475      0.4    3.23
 Mexico peso                          17.7885    -0.98   15.99
 Chile peso                             626.6     0.62    7.04
 Colombia peso                        2949.30     0.16    1.77
 Peru sol                               3.240     0.00    5.37
 Argentina peso (interbank)             17.27     0.46   -8.08
 Argentina peso (parallel)              18.21     0.00   -7.63
 (Additional reporting by Sheky Espejo; Editing by Lisa Von Ahn
and Cynthia Osterman)
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