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EMERGING MARKETS-Interest rate jitters, recession worries crush Latam FX

* Eurozone business activity downturn feeds growth fears * Brazil's real leads declines among currencies * Hungary's economy to contract, per ministry forecast By Amruta Khandekar Sept 23 (Reuters) - Brazil's real dropped over 2% on Friday, leading sharp declines across Latin American currencies as fears that aggressive interest rate hikes by major central banks could cause a global recession drove the safe-haven dollar to fresh 22-year highs. Surveys showing a drop in business activity across the euro zone and Britain fueled fears of a global economic downturn, adding to jitters around interest rate hikes by the Federal Reserve and other central banks this week. The Brazilian real's decline was despite central bank intervention, selling $2 billion in the spot market with a repurchase agreement. The currency was on track for its sharpest one day fall in 11 weeks. Still, the real was set to end the week higher, outperforming emerging market peers. As concerns about weaker demand hit crude and metal prices, currencies of Mexico and Colombia fell 0.7% and nearly 1%, respectively, while top copper exporter Chile's peso fell 2%, hitting its lowest in over two months. "Risk assets are under pressure while demand for USD continues and I see little chance of that changing anytime soon," said Christian Lawrence, senior cross-asset strategist at Rabobank. "Latin America should outperform CEE (Central and Easten Europe) and Asia though." Most Latam central banks started their hiking cycles early and went big, helping them stay ahead of the Fed. They also benefited from the rise in commodity prices earlier this year. The Brazilian real has seen volatility in the run-up to elections in October, but has still gained 7% so far this year. Brazil's presidential frontrunner Luiz Inacio Lula da Silva slightly boosted his lead over incumbent President Jair Bolsonaro to 14 percentage points, a poll showed. The country's government estimated on Thursday it will post a primary surplus this year, the first since 2013. "(Brazil's) fiscal revenues have consistently surprised on the upside over the past 12 months. The outlook for 2023 remains much more challenging, largely because of the massive increase in election-related government spending," wrote Elizabeth Johnson, managing director of Brazil Research at TS Lombard in a note. Meanwhile, Hungary's economy is set to contract for several quarters from the end of this year, with growth only expected to return in late-2023, based on a forecast by the country's finance minister. The forint edged lower against the euro. The National Bank of Hungary is likely to raise its base rate by another 100 basis points to 12.75% next Tuesday, a Reuters poll showed. Mexico and Colombia are also due to announce interest rate decisions next week. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 903.79 -2.04 MSCI LatAm 2111.64 -3.81 Brazil Bovespa 111088.62 -2.61 Mexico IPC 45182.35 -2.47 Chile IPSA 5220.61 -1.55 Argentina MerVal 143712.71 -3.859 Colombia COLCAP 1178.63 -1.91 Currencies Latest Daily % change Brazil real 5.2360 -2.32 Mexico peso 20.1425 -1.05 Chile peso 968.9 -2.58 Colombia peso 4434.11 -1.68 Peru sol 3.9073 -0.88 Argentina peso (interbank) 145.4500 -0.19 (Reporting by Amruta Khandekar; Editing by Andrea Ricci)

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