May 11, 2020 / 2:59 PM / 3 months ago

EMERGING MARKETS-Latam FX weaken; Argentine peso at record low

    * Argentina extends $65 bln debt deadline to May 22
    * Brazil c.bank to shower economy with money in case of
depression
    * Mexico's plans to reopen economy, cenbank meeting eyed
    * Emerging economies burn through $240 bln in reserves -
BofA
    * Latam's second-largest carrier Avianca files for
bankruptcy

    By Susan Mathew
    May 11 (Reuters) - Latin American currencies weakened on
Monday, led by Brazil's real, while the Argentine peso dipped to
new lows with negotiations over a $65 billion debt restructuring
proposal extended as default risk loomed.
    Sentiment worldwide fizzled as some countries such as South
Korea and China reported a second wave of the COVID-19 disease,
while the number of new cases in parts of the emerging world
such as Brazil, Russia and Mexico still remained worryingly
high. 
    Investors fear that this would force economies back into
lockdown, intensifying economic damage and delaying a recovery
in global growth.
    The Argentine peso slid as the deadline for the debt
restructuring got extended to May 22 after an initial cut-off
passed on Friday without the support needed for a comprehensive
deal. This means the offer will expire the same day Argentina
could trigger default over a $500 million interest payment.

    Brazil's real, one of the worst performing currencies
this year in the emerging markets, fell around 1% staying near
record lows.
    The country's Economy Minister Paulo Guedes on Saturday said
the central bank is likely to shower the economy with money in
case of a depression due to the pandemic. 
    Consensus is rising that Latam's largest economy will shrink
by more than 4% this year, with interest rates and inflation
forecasts also being revised down to all-time lows.
 
    But Goldman Sachs strategists note that Latin America shows
the most value in emerging markets, given its dependence on
commodity prices - an area they expect to perform stronger in
the second half of the year.
    Leading emerging countries, including China, Hong Kong,
Brazil and Turkey, have burned through $240 billion in foreign
exchange reserves over the past two months, Bank of America said
on Monday, as central banks look to prop up their currencies and
economies in the face of COVID-19.
    Mexico's peso lost 0.7% with investors awaiting the
government's plans to reopen the economy this week from the
pandemic-induced lockdown. President Andres Manuel Lopez Obrador
expects to make an announcement by mid-week.  
    On Thursday, all eyes will be on the central bank's rate
meeting. Analysts at Monex Europe expect the bank to cut by
another 50 basis points, followed by 100 basis points in
subsequent meetings.  
    But, "the remarkably high uncertainty in inflation outlook
and the lower effectiveness of monetary policy in isolation amid
a notably shy fiscal policy response... leads us to believe
that.. (the) moves will be mainly aimed at reinforcing market
stability and reducing financial distortions," writes Monex's FX
market analyst Olivia Alvarez Mendez.
    Among stocks, notable moves were in Brazilian meat processor
 BRF SA which rallied after narrowing its quarterly
loss, while reinsurer IRB slumped on being probed on
liquidity issues.
    With airlines worldwide being among worst hit sectors by the
pandemic, Latin America's second-largest carrier Avianca
, filed for bankruptcy on Sunday, after failing to
meet a bond payment deadline.
    
    Key Latin American stock indexes and currencies at 1434 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     915.51     0.42
                                   
 MSCI LatAm               1601.77    -1.37
                                   
 Brazil Bovespa          80004.06    -0.32
                                   
 Mexico IPC              37384.11    -0.64
                                   
 Chile IPSA               3849.23     0.81
                                   
 Argentina MerVal        35501.95   -1.885
                                   
 Colombia COLCAP          1104.82    -0.49
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.8110    -1.25
                                   
 Mexico peso              23.8930    -1.14
                                   
 Chile peso                 827.5    -0.12
                                   
 Colombia peso            3904.47    -0.40
                                   
 Peru sol                  3.4117    -0.14
                                   
 Argentina peso           67.3600    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;
Editing Alistair Bell)
  
Nuestros Estándares:Los principios Thomson Reuters
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