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EMERGING MARKETS-Brazil's real supported by positive data; Latam FX drops

Ambar Warrick
·2 min read
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* Latam stocks recover from near 2-month low * Copper weakness dents Chile's peso By Ambar Warrick Jan 28 (Reuters) - Latin American currencies sank on Thursday as concerns over the regional spread of the coronavirus and slow vaccine rollouts weakened sentiment, while positive data limited losses in Brazil's real. The COVID-19 death toll in the Americas reached a million, with Brazil and Mexico- economic heavyweights in Latin America- struggling to cope with spiking infections and overloaded hospitals. Mexican and Chilean currencies lost about 0.1% and 0.3%, respectively, while the MSCI's index of Latin American currencies fell 0.2% after falling sharply on Wednesday. Losses in Brazil's real were mitigated by positive employment and lending data that suggested an economic recovery was underway. But the prospect of high government debt and stretched fiscal spending has reduced appetite for the country's assets. The rampant spread of the virus has also disrupted economic activity. Brazilian industrial confidence fell in January for the first time in nine months, a survey showed. The U.S. dollar rose as the rollout of a COVID-19 vaccine in the developed world appeared to be delayed, while data showed the U.S. economy contracted at its worst pace since World War Two in 2020. "The combination of an exhausted reflation theme, agitated central bankers over local currency dynamics, a sidelined Fed and fixed income supply pressures should favor a firmer USD in the coming weeks... additional pressure in risk could exacerbate a position unwind in the FX space," Mazen Issa, senior FX strategist at TD Securities wrote in a note. Chile's peso was among the worst-performing Latin American currencies on Thursday after the central bank held interest rates at ultra-low levels. A drop in copper prices- Chile's top export- also weighed on the peso. Mexico's peso came under pressure from weak oil prices. The country's central bank stressed the need to attract more investment, and that the country would continue to face economic uncertainty in 2021. Latin American stocks rose in early trade, recovering from a nearly two-month low. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1351.58 -1.45 MSCI LatAm 2354.43 0.8 Brazil Bovespa 116995.36 0.96 Mexico IPC - - Chile IPSA 4365.28 -1.2 Argentina MerVal - - Colombia COLCAP 1374.85 - Currencies Latest Daily % change Brazil real 5.3948 0.12 Mexico peso 20.3050 -0.12 Chile peso 741.5 -0.30 Colombia peso 3583.82 0.57 Peru sol 3.6438 - Argentina peso 87.1100 -0.10 (interbank) (Reporting by Ambar Warrick in Bengaluru; editing by Barbara Lewis)