March 5, 2020 / 8:02 PM / a month ago

EMERGING MARKETS-Surging coronavirus cases roil Latam FX, economic fears mount

    * Brazilian real slides to new record low
    * Brazil central bank intervenes thrice in FX market  
    * Colombia peso tracks declines in oil prices

 (Adds comments, updates prices)
    By Shreyashi Sanyal
    March 5 (Reuters) - Latin American currencies tumbled on
Thursday, with Brazil's real touching new lows, as the rapid
spread of the coronavirus outside China pushed investors away
from riskier assets on growing worries about the scale of the
economic damage.  
    Brazil's real continued its slide, falling 1.4% to a
fresh low of 4.6663 to the dollar, while Mexico's peso
lost more than 1.7% heading for its third straight session of
losses.
    "The market is getting more concerned about the impact to
growth globally and what you are seeing is that a slowdown in
global growth creates concerns for growth in emerging market
economies," said Jeff Grills, head of emerging markets debt at
Aegon Asset Management. 
    "Currency weakness is one way you can see that slowdown
being expressed."
    Colombia's currency slid nearly 2%, tracking losses
in oil prices, while Chile's peso touched a three-month
low despite a rise in its main export good, copper.
  
    The weakness in regional currencies was in line with broader
emerging market peers and came even as the dollar languishes at
two-month lows as investors bet the U.S. Federal Reserve will
reduce lending rates further after delivering an emergency
interest rate cut on Tuesday. 
    Hopes have risen that other central banks might follow suit
as the virus spreads aggressively across the globe, forcing
whole cities to shut down and bringing economic activity in
those areas to a standstill.
    The number of infected cases globally is fast approaching
100,000, and the death toll has climbed to over 3,300. 
    In Brazil, the deteriorating economic outlook for 2020
exacerbated in recent days by coronavirus fears, raised bets the
central bank will cut interest rates for the sixth time since
the beginning of its easing cycle in 2019, at its March 17-18
meeting to a new low of 4%.
    The central bank of Brazil intervened in the FX derivatives
market three times on Thursday, selling a total of $3 billion
swaps contracts, but the pressure is mounting on the central
bank to tap its $360 billion stockpile of FX reserves and sell
dollars outright to ease the pressure on the real.
    "They (Brazil central bank) will eventually get to a point
where if it approaches 5 reais to the dollar, that is where they
can get a lot more success. That is when people will realize
that the currency has moved too far relative to general
expectations for fair value," Grills said. 
    Sao Paulo stocks shed almost 4%, led lower by
carriers Gol and Azul because airlines
have been one of the worst hit by the outbreak as travel curbs
restrict demand.       
    Key Latin American stock indexes and currencies at 1937 GMT:
   
  Stock indexes                Latest        Daily % change
 MSCI Emerging Markets              1037.54           -0.03
                                             
 MSCI LatAm                         2383.61           -4.94
                                             
 Brazil Bovespa                   103011.63           -3.93
                                             
 Mexico IPC                        42518.26           -2.04
                                             
 Chile IPSA                         4324.09           -0.97
                                             
 Argentina MerVal                  36771.53          -1.267
                                             
 Colombia COLCAP                    1543.79           -0.05
                                             
                                                           
      Currencies               Latest        Daily % change
 Brazil real                         4.6459           -1.43
                                             
 Mexico peso                        19.8910           -1.82
                                             
 Chile peso                           823.2           -0.80
                                             
 Colombia peso                         3537           -1.75
                                             
 Peru sol                            3.4587           -1.18
                                             
 Argentina peso                     62.4175           -0.09
 (interbank)                                 
                                             
 
    

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
editing by Jonathan Oatis and Lisa Shumaker)
  
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