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EMERGING MARKETS-Chile's peso surges as c.bank intervenes, Latam stocks slide amid China gloom

·3 min read

By Susan Mathew July 15 (Reuters) - Chile's peso shot up as much as 6% on Friday, as the central bank intervened to lift the currency from record lows, while a pause in the dollar prompted gains in most other Latin American currencies. The Chilean currency was on track for its best session ever as the central bank agreed to a $25 billion intervention in the foreign exchange market to support the currency amid a rallying dollar. Bets about an aggressive move by the U.S. Federal Reserve this month and safe-haven appeal amid recession worries have powered the dollar to near two-decade highs. Tumbling prices of copper, Chile's main export revenue item, amid worries about falling demand from top metal consumer China, have also weighed on the currency. The peso breached 1,060 per dollar for the first time on Thursday and has been in record low territory for over three weeks. The central bank move lifted it to 986.30 on Friday. "The recent sell-off will force Central Bank of Chile policymakers to raise policy rates more aggressively and extend the tightening cycle. ... As policymakers step up policy tightening and intervention efforts, the currency can rebound," said analysts at Wells Fargo. Mexico's peso rose 0.3% as the dollar took a breather after two of the Fed's most hawkish policymakers said overnight they favoured another 75-basis-point hike after hot U.S. inflation had raised bets of a 100 bps move this month. As oil prices recovered, crude exporter Colombia's peso firmed 1.3% to 4,425.6, moving further away from record lows of 4,658.02 it hit earlier this week. Brazil's real gave up early gains to trade 0.3% lower. Stocks in the region fell, in line with broader emerging market peers, as recession worries heightened after grim economic growth data from China earlier in the day. Losses on Brazil's Bovespa index were led by iron ore miner Vale as the steel-making ingredient dipped below $100 on pessimism over China demand. Argentina's heavily controlled peso fell 0.2%. A Bloomberg report said Argentina's central bank held its benchmark interest rate at 52%, according to a person with direct knowledge of the matter. The decision in not official yet and comes as inflation galloped to 64% in the 12 months to June. Meanwhile, Argentina's central bank on Thursday announced a change in its strategy for setting the country's interest rates, seeking to achieve positive real interest rates, which is part of its credit agreement with the International Monetary Fund. Key Latin American stock indexes and currencies at 1357 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 959.31 -0.64 MSCI LatAm 1911.90 -0.04 Brazil Bovespa 95432.40 -0.72 Mexico IPC 46922.91 0.39 Chile IPSA 5061.83 -1.43 Argentina MerVal - - Colombia COLCAP 1266.06 -0.51 Currencies Latest Daily % change Brazil real 5.4469 -0.28 Mexico peso 20.7556 0.17 Chile peso 1008.1 4.00 Colombia peso 4425.6 1.29 Peru sol - - Argentina peso 128.2100 -0.16 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis)