April 27, 2020 / 8:01 PM / a month ago

EMERGING MARKETS-Political uncertainties pressure Brazil's real; Latam stocks rise

    * Brazil's real stays close to record lows
    * Analysts evaluate likelihood of Bolsonaro's impeachment
    * Mexican peso firms 
    * MSCI Latam stocks index rises 3% 

 (Updates prices)
    By Ambar Warrick and Susan Mathew
    April 27 (Reuters) - Brazil's real stayed near record lows
on Monday, and most other Latin American currencies also
weakened, while regional stocks took heart from a global rally
on stimulus measures. 
    The real fell about 0.2% after tumbling last week
when Brazil's popular justice minister, Sergio Moro, known for
his investigations in the Car Wash corruption probe,
resigned.
    Moro cited political interference in law enforcement, and
his resignation dealt a severe blow to Brazilian President Jair
Bolsonaro, spurring speculation by analysts about the likelihood
of impeachment.
    Bolsonaro sought to calm markets by voicing support for his
remaining 'super minister,' Economy Minister Paulo Guedes,
assuring them that Guedes and central bank chief Roberto Campos
Neto had full control over economic policy. 
    "Depending on the intensity of the impacts and the
government's ability to administer the crisis, we could see
Congress's support of structural reforms dwindle and uncertainty
increase regarding the trajectory of the gross debt-to-GDP ratio
in the medium term," Credit Suisse analysts said in a note. 
    Analysts at ING now expect another 50-basis-point interest
rate cut by the central bank next week. They see the dollar-real
pair peaking at 5.8, but say the confirmation of a deeper
realignment of economic policy, with the departure of Guedes,
would likely prompt an even deeper sell-off toward 6-6.5. 
    Elsewhere, the Chilean peso lost 0.2% while sliding
oil prices pressured crude exporter Colombia's currency. 
Mexico's peso, meanwhile, firmed 0.8% against a weaker
dollar, after losing 5% over the last five sessions.
    The greenback fell across the board as several countries
looked to reopen economies and as stimulus measures and hopes of
more boosted risk appetite. 
    The Bank of Japan pledged to buy an unlimited amount of
bonds to keep borrowing costs low as the pandemic wreaks
economic havoc. All eyes are now on the U.S. Federal Reserve and
the European Central Bank's decisions due later in the week. 
    Wall Street stock indexes rose, and regional bourses
followed, helping an index of Latam stocks rise
almost 3% and end a five-session losing streak.  
    The Latam stock index is about 14% above the lows hit in
March, but is still down nearly 24% for the year.
    The pandemic is expected to hit emerging markets
particularly hard, given that many economies of that kind were
already in dire straits before the outbreak culled business
activity across the globe.
    "We see risks skewed towards a renewed increase in EM FX
volatility as the economic shock on EM economies intensifies and
risks of further waves of virus cases increases," wrote Mitul
Kotecha, senior emerging markets strategist at TD Securities, 
    "Unlike developed economies, the capacity for EM governments
and central banks to deal with the economic and health shock is
lower." 
    Key Latin American stock indexes and currencies at 1944 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     895.65     1.85
                                   
 MSCI LatAm               1552.09     3.33
                                   
 Brazil Bovespa          78473.32     4.17
                                   
 Mexico IPC              35040.84     1.31
                                   
 Chile IPSA               3802.36     3.33
                                   
 Argentina MerVal        29851.33    2.028
                                   
 Colombia COLCAP          1127.44     0.45
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.6794    -0.25
                                   
 Mexico peso              24.7550     0.78
                                   
 Chile peso                 859.5    -0.08
                                   
 Colombia peso            4050.53    -0.28
                                   
 Peru sol                  3.3968    -0.06
                                   
 Argentina peso           66.5200    -0.14
 (interbank)                       
                                   
  

 (Reporting by Ambar Warrick in Bengaluru
Editing by Paul Simao and Jonathan Oatis)
  
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