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EMERGING MARKETS-Deeper c.bank rate cut pushes Brazil's real to new low; broader Latam rises

Susan Mathew

By Susan Mathew May 7 (Reuters) - Brazil's real slumped more than 2% to new lows on Thursday after the country's central bank made a bigger-than-expected cut to its key rate, while most other Latin American currencies made healthy gains against the dollar. Although Asian shares took little solace from a bumper surprise move up in China's April exports, other markets including commodities, cheered the data on hopes the world's second-largest economy may be able to recover sooner than expected from a pandemic-induced lockdown. As oil prices jumped, currencies of crude producers Mexico and Colombia rose almost 1%, while rallying copper prices lifted exporter Chile's peso. Most regional shares rose between 0.8% and 1.7%, in line with gains in Wall Street indexes, but Brazil's Bovespa fell. Brazil's currency slid to 5.857 as the central bank cut rates by 75 basis points, 25 basis points more than a consensus estimate, to yet another record low of 3%. The bank also previewed more action as it battles the economic damage wrought by the novel coronavirus pandemic. "In our view, the authority seems bold in their dovish flight plan in terms of new stimuli ahead," wrote Rabobank strategists Mauricio Une and Gabriel Santos. "We now see one more rate cut of 75 basis points in the next meeting in June, with the Selic ending the year at 2.25% p.a." As the country registered a record daily rise in the number of coronavirus cases - 10,503 in 24 hours - authorities flagged the possibility of strict lockdowns in particularly hard-hit areas. This signals further deterioration in economic indicators as economic activity stalls. The currency has lost about 31% so far this year making it one of the worst performing in the emerging market space. Riskier assets of emerging markets have taken a beating this year on worries about the dent to global economic growth caused by the virus, a couple of oil shocks and more recently a flare- up in U.S.-China tensions. But hope may be around the corner, at least for some, say Deutsche Bank analysts. "While developed markets have been hit especially hard, we see many emerging markets faring better overall, at least in terms of economic performance," they said, citing the success of some Asian countries in containing the virus. "In EM cases where timing, commitment, and resources have been lacking, the virus has spread further, and acceptance of a higher casualty rate may have been the price paid for efforts to limit the negative economic fallout. The severity of the inherent risks in this strategy have yet to be determined." Key Latin American stock indexes and currencies at 1414 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 896.96 -0.19 MSCI LatAm 1572.75 -1.67 Brazil Bovespa 78667.11 -0.5 Mexico IPC 37257.51 0.73 Chile IPSA 4029.85 1.64 Argentina MerVal 0.00 0 Colombia COLCAP 1101.94 1.06 Currencies Latest Daily % change Brazil real 5.8610 -2.74 Mexico peso 24.1420 0.87 Chile peso 838.2 0.12 Colombia peso 3926.72 0.70 Peru sol 3.4078 0.11 Argentina peso 67.1800 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Andrea Ricci)