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EMERGING MARKETS-Brazil's real weakens as inflation slows; Mexican, Chilean pesos rise

Susan Mathew
·3 min read

By Susan Mathew Aug 25 (Reuters) - Brazil's real erased early losses on Tuesday after data showed inflation slowed more than expected, while Colombia's peso extended losses after Fitch warned the Andean country was likely to lose its investment grade. But Mexico's peso rose 0.2% to stay near one-month highs and Chile's peso gained 0.5%, as the dollar weakened. Reaffirmation that Washington and Beijing are committed to their Phase 1 trade deal, and that the United States is considering expediting AstraZeneca's COVID-19 vaccine candidate, saw the greenback lose some of its safe-haven appeal. Brazil's real fell 0.3%. Data showed the monthly rate of inflation in the country slowed in August, according to a mid-month measure, and the annual rate was still slightly lower than expected by economists and below the central bank's 2.5% floor of its target band. Interest rates in Brazil are at record lows, and analysts warn that recent political uncertainty and jitters about the country's fiscal position increase the possibility for more cuts. Separate data showed Brazil's balance of payments position with the rest of the world strengthened in July, with the 12-month current account deficit narrowing to 2% of GDP - the narrowest gap since November, 2018. The real declined on Monday after the government said a broader package of economy-supporting measures would be delayed beyond Tuesday. "The biggest risk to financial markets will be when governments and central banks start tapping the breaks with their pandemic relief efforts," said Edward Moya, senior market analyst at OANDA. Stocks in Sao Paulo fluctuated and were last down 0.4% as shares of miner Vale shed 1.5% after pension fund Previ reduced its stake below 5%, and as iron ore prices fell. Tracking a choppy session on Wall Street, the main stock indexes in Mexico and Chile fell, while Colombia's COLCAP rose 0.7% to an 11-week high. Colombia's currency extended losses after ratings agency Fitch on Monday said Colombia could lose its investment grade within two years as the coronavirus pandemic shrinks its economy. Argentina's peso fell to new lows ahead of a Friday deadline for creditors to approve its bond restructuring deal. The country's central bank chief on Tuesday said the deal should help reduce the wide gap between the currency's official and black market exchange rates. Key Latin American stock indexes and currencies at 1424 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1111.70 0.31 MSCI LatAm 1963.24 0.07 Brazil Bovespa 101939.61 -0.35 Mexico IPC 37986.30 -0.11 Chile IPSA 3947.45 -0.38 Argentina MerVal 46600.90 -0.291 Colombia COLCAP 1213.80 0.72 Currencies Latest Daily % change Brazil real 5.6056 -0.26 Mexico peso 21.9590 0.09 Chile peso 782.2 0.13 Colombia peso 3866.01 -0.33 Peru sol 3.5917 -0.19 Argentina peso 73.8000 -0.09 (interbank) (Reporting by Susan Mathew in Bengaluru Editing by Paul Simao)