September 9, 2016 / 11:17 PM / 2 years ago

EMERGING MARKETS-Latam markets slump on N. Korea nuclear test, Fed jitters

By Bruno Federowski

SAO PAULO, Sept 9 (Reuters) - Most Latin American currencies and stocks slumped on Thursday, weighed down by concerns over North Korea’s latest nuclear test and hawkish comments by a U.S. Federal Reserve policymaker.

Traders scurried for the safety of the U.S. dollar at market open after North Korea announced it had conducted its fifth nuclear test.

The search for safe havens accelerated following a speech by Boston Fed President Eric Rosengren, who said the U.S. central bank increasingly faces risks if it waits too much longer to raise rates.

His remarks rekindled expectations that the Fed could tighten policy soon after a batch of surprisingly weak economic figures triggered a collapse of bets on a September rate hike.

The Colombian peso weakened 2.65 percent after four days of gains as prices of crude oil, a key export and source of tax revenue, fell below $49 per barrel.

The Brazilian real retreated 2.17 percent to the greenback as traders worried that newly inducted President Michel Temer could struggle to find support for painful austerity measures among both voters and lawmakers.

Central bank figures showing strong outflows last week also fostered concerns that expectations of a flurry of foreign capital following the impeachment of Temer’s predecessor, Dilma Rousseff, could have been overly optimistic.

Nearly all shares in Brazil’s benchmark Bovespa stock index fell. Pulpmakers Suzano Papel e Celulose SA and Fibria Celulose SA were the only gainers, with the weaker real boosting the export-heavy sector.

Shares in Usinas Siderúrgicas de Minas Gerais fell 4.7 percent after its board approved the terms of a debt renegotiation deal with banks and bondholders involving 92 percent of the steelmaker’ s total debt. (Reporting by Bruno Federowski; Editing by Lisa Von Ahn and David Gregorio)

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