March 4, 2020 / 7:59 PM / a month ago

EMERGING MARKETS-Brazil's real touches new low as Fed rate cut spurs bets of more easing

    * Brazil central bank to intervene in FX market on Thursday 
    * Brazil GDP shows 2019 growth slowed, 2020 looks weak
    * Mexico to speed up spending, spur private investment  

 (Adds comment, updates throughout)
    By Shreyashi Sanyal
    March 4 (Reuters) - Brazil's real led a slide among Latin
American currencies on Wednesday after an emergency interest
rate cut from the U.S. Federal Reserve spurred expectations of
more monetary easing in the region.    
    The real slumped 1.3% to 4.5743 against the dollar
, touching a fresh all-time low, while a rebounding
greenback added to the currency's woes.    
    The central bank of Latin America's biggest economy said it
will auction up to $1 billion foreign exchange swaps contracts
on Thursday, the latest FX market intervention amid the real's
more than 12% slide this year.
    An emergency rate cut by the Fed on Tuesday to combat the
economic impact from the fast-spreading coronavirus stoked fears
that the extent of the fallout might be worse than anticipated
and that regional central banks might follow suit. 
    "The Fed took center stage yesterday, offering the markets
an unscripted 50bp cut. The reaction probably did not go as well
as planned, as equities tanked in the aftermath," said Mark
McCormick, global head of FX strategy at TD Securities. 
    "That said, the Fed's move has kick-started a new
wave of easing."
    Speculation is rife that Brazil's central bank will cut
interest rates by 25 basis points to a new low of 4%. 
    Data showed growth in Brazil's economy slowed last year with
momentum pointing to a weak 2020, while a separate survey showed
the country's dominant services sector expanded at its slowest
pace in eight months in February.     
    Mexico's plans to speed up public spending and is urging the
private sector to boost investment to counter the impact of the
coronavirus outbreak, Finance Minister Arturo Herrera said on
Tuesday, adding that the government was working closely with
Bank of Mexico to coordinate a suitable response. 
    Stocks in Brazil and Chile rallied
strongly, in line with U.S. equities.
    IRB Brasil Resseguros led losers on Sao Paulo's
main index, plunging 34.5% after Berkshire Hathaway
denied media reports that it was a shareholder in the Brazilian
reinsurer.    
    Key Latin American stock indexes and currencies at 1941 GMT:
    
  Stock indexes            Latest      Daily %
                                        change
 MSCI Emerging Markets       1036.76        0.87
                                      
 MSCI LatAm                  2486.49       -0.42
                                      
 Brazil Bovespa            107012.17         1.4
                                      
 Mexico IPC                 43327.39        2.01
                                      
 Chile IPSA                  4366.36        1.79
                                      
 Argentina MerVal           37138.96       3.166
                                      
 Colombia COLCAP             1540.86        1.87
                                      
                                                
      Currencies           Latest      Daily %
                                        change
 Brazil real                  4.5807       -1.54
                                      
 Mexico peso                 19.5550       -0.55
                                      
 Chile peso                    816.6       -1.16
                                      
 Colombia peso                  3476       -0.43
                                      
 Peru sol                     3.4177        0.15
                                      
 Argentina peso              62.3575       -0.08
 (interbank)                          
                                      
 
    

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Editing by Bernadette Baum and Tom Brown)
  
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