April 5, 2016 / 4:32 PM / 2 years ago

EMERGING MARKETS-Latam currencies fall sharply on global risk aversion

By Bruno Federowski
    SAO PAULO, April 5 (Reuters) - Latin American currencies
weakened sharply on Tuesday as concerns over global growth,
lower commodity prices and prospects of higher U.S. rates drove
investors to the safety of the dollar.
    International Monetary Fund Managing Director Christine
Lagarde warned on Tuesday of global economic risks, calling for
stronger government action. 
    Coupled with a round of weak European economic figures, the
comments boosted financial market angst toward the global growth
outlook, which took its toll on commodities prices. 
    An unexpected shortfall in U.S. demand for oil also weighed
on crude prices as the chance of a coordinated output cut seemed
to fade away.
    Traders remained skittish following mixed messages by
Federal Reserve policymakers as to when the U.S. central bank
will increase rates. Strong services data supported expectations
that a rate hike could come sooner rather than later, reducing
the allure of higher-yielding - but higher-risk - emerging
market assets. 
    "There is a distinct whiff of risk aversion lingering over
the markets," analysts with Scotiabank wrote in a research note.
    The Brazilian real fell more than its peers as
traders pared bets on President Dilma Rousseff's ouster as her
efforts to stave off impeachment grew in strength. Brazil's
attorney general urged a congressional committee on Monday to
discard impeachment charges against the leftist president.
    Nevertheless, the benchmark Bovespa stock index rose
more than 1 percent on the back of a jump in Petrobras shares
. The state-controlled oil company, formally known as
Petroleo Brasileiro SA, earlier denied media reports that it
planned to reduce domestic fuel prices. 
    Shares of Vale SA also jumped after the miner
agreed to sell its stake in a Brazilian steel plant to majority
owner Thyssenkrupp for a token sum. 
    Key Latin American stock indexes and currencies at 1600 GMT:
 Stock indexes                     Latest        Daily     YTD
                                                   pct     pct
                                                change  change
 MSCI Emerging Markets                 811.93     -1.8    4.11
 MSCI LatAm                          2,078.28    -1.47   15.27
 Brazil Bovespa                     49,374.35     1.22   13.90
 Mexico IPC                         45,379.89    -0.65    5.59
 Chile IPSA                          3,929.74    -0.52    6.78
 Chile IGPA                         19,260.30    -0.46    6.11
 Argentina MerVal                   12,640.83    -1.12    8.27
 Colombia IGBC                       9,813.20    -0.81   14.81
 Venezuela IBC                      14,705.46      0.6    0.80
 Currencies                            Latest    Daily     YTD
                                                   pct     pct
                                                change  change
 Brazil real                           3.6691    -1.53    7.57
 Mexico peso                          17.7365    -1.40   -2.86
 Chile peso                             674.7    -0.62    5.19
 Colombia peso                       3,084.05    -0.68    2.76
 Peru sol                              3.3591    -0.30    1.63
 Argentina peso (interbank)           14.6600     0.48  -11.44
 Argentina peso (parallel)              15.08     0.73   -5.37
 (Reporting by Bruno Federowski; Additional reporting by Paula
Arend Laier; Editing by XX)
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