EMERGING MARKETS-Mexico peso slumps on NAFTA, Brazil currency eases
(Updates prices) By Bruno Federowski BRASILIA, June 5 (Reuters) - The Mexican peso on Tuesday fell to its weakest since February 2017 after the United States raised the possibility of turning negotiations over the North American Free Trade Agreement into bilateral talks.
White House economic adviser Larry Kudlow said on Tuesday U.S. President Donald Trump is considering holding separate talks with Canada and Mexico, adding fuel to concerns the United States could scrap NAFTA.
Kudlow's remarks accentuated a selloff in the peso that was triggered by Mexico's imposition of retaliatory measures against U.S. tariffs on imports of Mexican steel and aluminum.
The peso weakened as much as 1.9 percent to 20.46 to the dollar. In a client note, strategists at Continuum Economics said the central bank could consider hiking rates or intervening in currency markets if the currency broke past the 20.50 mark.
Concerns over U.S. protectionism, coupled with rising U.S. bond yields, are weighing on demand for emerging-market assets.
Brazilian stocks and currencies also closed sharply down.
Uncertainty about this year's elections in Brazil caused the real to close at 3.81 per dollar, a drop of 1.78 percent.
A poll on Tuesday showed increased polarization ahead of Brazil's October presidential elections, with far-right lawmaker Jair Bolsonaro leading the ballot followed by center-left populist Ciro Gomes.
"A leftist candidate seems to be more competitive than a market-friendly candidate," a portfolio manager at a São Paulo-based brokerage said.
Demand for Brazilian assets has also suffered in the wake of nationwide truckers' strikes in the final weeks of May that drove policymakers to subsidize diesel prices.
Traders remain fearful the government will be forced to employ other costly measures to curb political instability, stepping back from efforts to stem a growing budget deficit.
Key Latin American stock indexes: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 1,145.17 -0.14 -1.01 MSCI LatAm 2,565.86 -1.46 -7.93 Brazil Bovespa 77,796.44 -1.02 1.83 Mexico IPC 45,275.94 0.07 -8.26 Chile IPSA 5,547.93 -0.19 -0.30 Chile IGPA 28,049.50 -0.17 0.25 Argentina MerVal 29,866.07 2.86 -0.66 Colombia IGBC 12,450.08 0.12 9.49 (Reporting by Bruno Federowski Additional reporting by Claudia Violante in São Paulo Editing by Chris Reese)
