September 19, 2019 / 7:58 PM / a month ago

EMERGING MARKETS-Real hits 2-week low after Brazil cuts rates to record low

 (Updates throughout, changes prices)
    By Sruthi Shankar
    Sept 19 (Reuters) - Brazil's real currency dropped to a
two-week low on Thursday, lagging its Latin American peers,
after the central bank cut interest rates to a new record low
and signaled room for further easing. 
    The real slid 1.3% to 4.1545 per dollar, its weakest
level since September 4, after the rate-setting committee, known
as Copom, cut rates to 5.50% on Wednesday in the face of an
uncertain global economic outlook and tame domestic inflation.

    Although the cut was in-line with market expectations, the
central bank forecast inflation next year to be only 3.80%,
below its official target of 4.00% despite modeling with a weak
currency and lower interest rate. 
    Citi economists expect rates to be cut by 50 basis points at
each of the next two meetings, bringing borrowing costs, known
as the Selic interest rate, to 4.5% at year end, and stay on
hold throughout 2020.
    "It will take renewed optimism on a China deal to give a
stronger bid to EMFX, including the BRL," they said.
    Brazil's Bovespa stock index held steady as shares
in Petrobras rose 1% after the state-run oil firm
hiked the average price of gasoline at refineries by 3.5% and
the price of diesel by 4.2%, a company representative told
Reuters.
    Telecommunications firm Oi was up 1.3%, after
sources said it was in talks with Spain's Telefonica
and Italy's Telecom Italia to sell its mobile network
to avoid insolvency.
    While expectations of lower interest rates helped retailers
and real estate companies, banks were deep in the red. The
benchmark Bovespa index, at 104538.49, is less than 2% from its
all-time high.
    Other Latin American currencies including Mexico's peso
 and Colombia's peso edged lower against the
dollar. Currencies im the region took a hit on Wednesday after
the U.S. Federal Reserve cut rates as expected, but gave mixed
signals about further cuts.
    Mexican stocks were mostly flat, while those in
Colombia edged 0.6% lower. 
    Markets in Chile were shut for a public holiday. 

    Latin American stock indexes and currencies at 1927 GMT:
    
        Stock indexes                  Latest       Daily %
                                                     change
 MSCI Emerging Markets                    1015.91       -0.53
 MSCI LatAm                               2689.39       -0.89
 Brazil Bovespa                         104538.49        0.01
 Mexico IPC                              43088.05        0.04
 Chile IPSA                                     -           -
 Argentina MerVal                        30227.46        0.52
 Colombia IGBC                           12943.92       -0.56
                                                             
           Currencies                  Latest       Daily %
                                                     change
 Brazil real                               4.1545       -1.26
 Mexico peso                              19.4480       -0.26
 Chile peso                                713.55        0.00
 Colombia peso                             3381.5       -0.25
 Peru sol                                   3.354       -0.12
 Argentina peso (interbank)               56.5700       -0.09
                                                   
 
 (Reporting by Sruthi Shankar
Editing by Alistair Bell)
  
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