EMERGING MARKETS-Latam currencies drop on Lockhart report; politics sinks real
SAO PAULO, Aug 4 (Reuters) - Latin American currencies weakened on Tuesday after the Wall Street Journal reported that Atlanta Federal Reserve president Dennis Lockhart would likely support a rate hike in September, while Brazil's currency sank on concerns over the economic implications of an ongoing corruption investigation. Mexican and Chilean stocks rose slightly, though a decline in Brazilian bank shares dragged the broader MSCI Latin American stock index to a 1 percent loss. The region's currencies had been trading higher in the early afternoon but reversed course after the newspaper reported that Lockhart said it would take "significant deterioration" in the U.S. economy for him to not support a rate hike in September. Higher interest rates in the world's largest economy are expected to draw funds away from riskier emerging markets such as Colombia and Chile. Both saw their currencies reverse early gains following the report. Meanwhile, Brazil's real hit an over twelve-year low of 3.48 per dollar. Brazilian police on Monday arrested former government minister Jose Dirceu, one of the most senior members of the ruling Workers' Party to be detained so far in a corruption scandal engulfing state-run oil company Petrobras. Traders said the deepening investigation could make it more difficult for the government to achieve the political backing to reach its fiscal goals and get the shrinking economy back on track. Brazil's Bovespa stock index fell for the third session in four. Shares of Itau Unibanco Holding SA, Brazil's largest non-government bank, dropped 3 percent after the company reported a bigger-than-expected jump in loan defaults for the second quarter. Other banking shares followed suit, with rival Banco Bradesco SA and state-run Banco do Brasil SA down 2 percent and 4 percent, respectively. Yields on Brazilian interest rate futures <0#DIJ:> climbed across the curve as traders demanded higher returns due to the higher political risk scenario. Key Latin American stock indexes and currencies at 1819 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 890.99 0.02 -6.85 MSCI LatAm 2243.98 -1.07 -16.84 Brazil Bovespa 49913.7264 -0.45 -0.19 7 Mexico IPC 45078.81 0.39 4.48 Chile IPSA 3844.92 0.22 -0.16 Chile IGPA 18725.89 0.25 -0.77 Argentina MerVal 10778.529 -1.1 25.64 Colombia IGBC 9872.88 -0.25 -15.14 Venezuela IBC 15284.42 -1.9 296.10 Currencies daily % YTD % change change Latest Brazil real 3.4820 -0.85 -23.68 Mexico peso 16.2595 -0.53 -9.32 Chile peso 683.49 -0.54 -10.59 Colombia peso 2923.2 -0.21 -18.31 Peru sol 3.1931 -0.03 -6.71 Argentina peso 9.1975 -0.03 -7.04 (interbank) Argentina peso 14.86 0.20 -5.79 (parallel) (Reporting by Asher Levine; Editing by Andrew Hay)
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