EMERGING MARKETS-Latam markets drop on growth fears; Brazil's real hangs on
SAO PAULO, Aug 20 (Reuters) - Latin American currencies weakened on Thursday, tracking a broader decline in emerging market assets, though the passage of a fiscal austerity bill helped prop up Brazil's real. The Colombian and Mexican pesos had the sharpest losses in the region, mainly due to lower prices for oil, an important commodity export for both countries. Commodities prices in general faced downward pressure on continuing concern over economic growth in China, a major purchaser of Latin America's raw materials. In addition, minutes from the U.S. Federal Reserve's most recent policy meeting, released Wednesday, suggested some policymakers remain cautious on the health of the world's largest economy, sapping appetite for riskier investments. The Brazilian real managed to stay in positive territory, however, after the Senate passed a bill late on Wednesday to roll back payroll tax breaks. The bill is a key measure in President Dilma Rousseff's efforts to reduce a gaping budget deficit and ward off a sovereign credit downgrade. The outlook for Brazil's economy remains dismal, however. Brazil's unemployment rate rose for a seventh straight month in July to the highest in over five years, government data showed on Thursday, underscoring expectations for a deep recession in 2015. Yields on Brazilian interest rate futures <0#DIJ:> dropped at the short end of the curve as traders cut bets that the central bank would hike rates to tame Brazil's stubbornly high inflation rate, currently at 9.57 percent on an annual basis. "The deterioration in the labor market is happening very quickly, much more than anyone expected," said fixed-income strategist Paulo Celso Nepomuceno at Sao Paulo brokerage Coinvalores. Equities markets moved lower across Latin America with Brazil's Bovespa stock index and Mexico's IPC index both dropping about 1 percent. The broader MSCI Latin American stock index also lost 1 percent, falling to its lowest level since March 2009. Key Latin American stock indexes and currencies at 1422 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 828.36 -1.45 -12.11 MSCI LatAm 2082.09 -0.95 -22.94 Brazil Bovespa 46135.4858 -0.97 -7.74 7 Mexico IPC 43079.31 -0.91 -0.15 Chile IPSA 3773.88 -0.11 -2.00 Chile IGPA 18439.58 -0.1 -2.28 Argentina MerVal 10954.22 0 27.69 Colombia IGBC 9413.91 -0.68 -19.09 Venezuela IBC 14908.4 0 286.35 Currencies daily % YTD % change change Latest Brazil real 3.4718 0.40 -23.45 Mexico peso 16.7445 -0.67 -11.95 Chile peso 693.98 -0.10 -12.69 Colombia peso 3053.5 -0.99 -21.79 Peru sol 3.2571 -0.06 -8.54 Argentina peso 9.2450 0.05 -7.52 (interbank) Argentina peso 15.1 -0.33 -7.28 (parallel) (Reporting by Asher Levine and Bruno Federowski; Editing by Peter Galloway)
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