September 8, 2017 / 10:24 PM / 10 months ago

EMERGING MARKETS-Chile peso falls as copper drops, North Korea weighs

 (Updates with final prices, context)
    By Bruno Federowski
    SAO PAULO, Sept 8 (Reuters) - Chile's peso on Friday posted
its biggest daily drop in four months as traders questioned
whether a rally in copper that has underpinned the currency's
upswing was justified, while geopolitical tensions weighed on
other markets such as Mexico.
    Markets were cautious as South Korea waited out the risk of
another missile test by North Korea on Saturday, the anniversary
of its founding. North Korea marks the occasion each year with a
big display of pageantry and military hardware.
    The Chilean peso weakened more than 1 percent to
620 to the dollar, snapping a string of four straight days of
gains but still near two-year highs. The drop came on the heels
of a decline in prices of copper, a key export, as traders
booked profits on a 20 percent surge that began in June.
    Analysts have voiced skepticism that the industrial metal
would continue to rise, given signs of stagnant demand from top
consumer China. Chinese data for August showed imports of copper
and copper products held steady for the fourth month in a row.
    Expectations that the Chilean central bank would react to
the peso's recent strength by cutting interest rates also helped
to temper those bullish on the currency, especially following
weaker-than-expected August price figures.
    Still, some remained confident. Nomura strategists
recommended clients bet that the Chilean currency would
outperform the Mexican peso.
    "The sharp increase in copper prices could potentially
front-load the country's process of investment recovery and
accelerate an economic rebound," they wrote in a report.
    The Mexican peso slipped 0.3 percent, driven lower
by higher risk aversion worldwide amid rising concerns about
what North Korea could do next.
    Tension on the Korean peninsula has escalated as North
Korea's leader, Kim Jong Un, has stepped up the development of
weapons. It has tested a string of missiles this year, including
one over Japan, and conducted its sixth nuclear test on Sunday.
    Apprehension over the expected arrival of lethal hurricane
Irma in Florida also kept markets on edge.
    Key Latin American stock indexes and currencies at 2210 GMT:
 Stock indexes                              daily %    YTD %
                                             change   change
 MSCI Emerging Markets             1091.17      0.1    26.55
 MSCI LatAm                        2942.08    -0.39     25.7
 Brazil Bovespa                   73078.85    -0.45    21.34
 Mexico S&P/BVM IPC               50083.80    -0.33     9.73
 Chile IPSA                        5091.81    -0.37    22.65
 Chile IGPA                       25475.58    -0.34    22.87
 Argentina MerVal                 24018.13    -0.96    41.97
 Colombia IGBC                    11210.11    -0.32    10.68
 Venezuela IBC                   279357.84      2.2   781.11
 Currencies                                 daily %    YTD %
                                             change   change
 Brazil real                        3.0945     0.24     5.00
 Mexico peso                       17.7150    -0.25    17.10
 Chile peso                          620.5    -1.05     8.09
 Colombia peso                      2906.5     0.05     3.27
 Peru sol                            3.232     0.06     5.63
 Argentina peso (interbank)        17.2000     0.03    -7.70
 Argentina peso (parallel)           17.83    -0.28    -5.66
 (Additional reporting by Miguel Angel Gutierrez; Editing by
Lisa Von Ahn and Lisa Shumaker)
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