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Analysts say emerging market currencies are likely to feel the worst of the damage from any global growth shock triggered by the coronavirus outbreak.
* Trump to restore tariffs on metal imports from Brazil, Argentina * Latam FX gain as dollar drops after weak U.S. manufacturing data * Brazil stocks rise after strong manufacturing data * Chilean peso firms as central bank intervention kicks in By Susan Mathew Dec 2 (Reuters) - A dollar weakened by poor U.S. economic data helped Latin American currencies brush off the re-imposition of U.S. tariffs on steel and aluminum imports from Brazil and Argentina on Monday. Brazil's real firmed 0.4% with a spot auction by the central bank supporting the currency, while the Argentine and Mexican pesos were flat against a dollar that slid on weak U.S. manufacturing data. Surprising officials in the two South American countries, U.S. President Donald Trump said on Monday he would restore tariffs on U.S. steel and aluminum imports, accusing them of devaluing their currencies to the detriment of U.S. farmers.
Adding to overall optimism, the U.S. Trade Representative's office said U.S. and Chinese trade officials were "close to finalizing" some parts of an agreement.
The currency had hit a two-month high of 3.99 per dollar earlier in the session. The Mexican peso pulled back 0.2%, but held near a three-month high hit earlier this week, while the Colombian peso and the Argentine peso slipped.
Most other currencies in the region also gained, with Colombia's peso hitting a five-week high, while Chile's currency jumped as much as 0.9%. A third day of gains for Brazil's real came after the Senate gave its final seal of approval for a landmark pension reform on Wednesday. The central bank on Thursday said Brazil's current account deficit as a share of gross domestic product widened to 2.05% in the 12 months to September.
Brazil's Senate on Wednesday gave its final seal of approval to a sweeping overhaul of the country's pension system, bringing to a close months of political wrangling over the government's keystone policy to stabilize public finances and boost growth. Senate President Davi Alcolumbre said that should be done by Nov. 19, once President Jair Bolsonaro returns from a series of official visits to Asia. Brazil's benchmark Bovespa stock index rose to a fresh record high just shy of 108,000 points, and the real firmed to around 4.03 per dollar, the strongest in six weeks.
LATAM's surge saw Chile stocks jump up to 2.5% during the session and hit their highest in almost five months, outperforming regional peers. Delta bought 20% of LATAM for $1.9 billion in a major new airline partnership, but also sold its stake in Brazil's largest airline Gol, which sent shares 6.5% lower followed closely by Gol's loyalty program, Smiles Fidelidade, which slid 5.3%.
Mexico's main stock index dipped 0.2%. The country's central bank cut the benchmark interest rate by 25 basis points for a second time this year, to 7.75%. "It's bit on the dovish side, which means there are more cuts ahead, which is reasonable," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman.
With the dollar on the backfoot, the Mexican peso jumped 1% to touch a three-week high on Friday, while currencies of Brazil, Colombia, Chile and Argentina rose between 0.43% and 0.86%.
MSCI's index of Latin American stocks rose 1.6%, tracking gains in global stock markets after the world's two largest economies agreed to hold high-level talks in early October. Brazil's Bovespa index jumped 1.2%, boosted by gains in banking shares as central bank President Roberto Campos Neto said the economy should recover in the second half of year, most likely in the fourth quarter. Campos Neto also said inflation in Brazil is well-anchored over the short-, medium- and long-term horizons, giving policymakers room to reduce interest rates further.
World stocks will keep rising over the coming year, according to the latest Reuters polls of strategists, but wild gyrations are likely in the lift from expected central bank policy easing and drag from developments in the U.S.-China trade war. Fears of a global economic slowdown as the world's largest economies become more deeply locked in a tit-for-tat trade tariff war unnerved world stocks last year, with all the indexes polled by Reuters, barring India and Brazil, in the red in 2018. While stocks have recovered globally so far this year, the latest polls of nearly 300 equity strategists showed nine of the 17 indexes polled on would not recoup last year's heavy losses by end-2019.