June 17, 2020 / 2:18 PM / 21 days ago

EMERGING MARKETS-Chile's peso drops after GDP downgrade; Brazil rate decision in focus

    * Chile's central bank holds interest rates
    * Brazil expected to cut rates by 75 basis points
    * Latam stocks strengthen 

    By Ambar Warrick
    June 17 (Reuters) - Chile's peso tumbled on Wednesday after
the central bank cut its economic growth outlook, while Brazil's
real was flat ahead of an interest rate decision, with most
Latin American markets trading muted. 
    The peso fell about 1.6% to the dollar after the
Chilean central bank revised its 2020 economic growth estimation
further into negative territory, as the country enters its
fourth month of lockdowns due to the coronavirus.
    The bank also maintained its benchmark interest rate at
0.5%, after several successive cuts up until late-March, as it
warned of a severe recession due to the pandemic.
    Chilean stocks rose 2%, tracking strength in
global equities as investors banked on more monetary support to
fish the economy out of a virus-led recession.
    Brazil's real was flat to the  dollar, while stocks
in the country rose ahead of a widely expected interest
rate cut by the central bank later in the day.
    While the cut - which will push rates further into
record-low territory - has been largely baked into asset prices,
markets will be watching for guidance from Latin America's
largest central bank, as it navigates the pandemic.
     "We expect the Monetary Policy Committee to signal that its
central/baseline scenario does not entail further Selic rate
cuts, but possibly without altogether eliminating the
possibility of delivering additional accommodation in the event
of a significant deviation from its central scenario," Goldman
Sachs analysts wrote in a note.
    Data showed that Brazil's services activity slumped at a
record pace in April, although analysts expect an eventual
recovery as virus-led lockdowns ease.
    Still, the reading illustrated the impact of the pandemic on
Brazil, given that services account for around 70% of Brazilian
economic activity. Growing coronavirus cases have also raised
questions over a premature easing of curbs.
    Colombia's peso rose slightly to the dollar. The
country's Fiscal Rule Advisory Committee recently agreed to
suspend government deficit limits until 2022 so that the
government has more space to meet the fiscal needs created by
the coronavirus pandemic.
    Colombian stocks fell 0.7%.
    Mexico's peso rose 0.5% to the dollar, while stocks
 inched up. The country's total confirmed coronavirus
infections rose to 154,863 cases and 18,310 total deaths on
Tuesday, as it prepares to exit strict lockdowns to prevent the
spread of the virus.
    Key Latin American stock indexes and currencies:
    Stock indexes             Latest     Daily % change
 MSCI Emerging Markets          994.17              0.43
 MSCI LatAm                    1945.47              0.05
 Brazil Bovespa               94235.51              0.75
 Mexico IPC                   37876.14             -0.05
 Chile IPSA                    4023.26              2.12
 Argentina MerVal                    -                 -
 Colombia COLCAP               1149.39             -0.45
       Currencies             Latest     Daily % change
 Brazil real                    5.2340             -0.06
 Mexico peso                   22.2430              0.30
 Chile peso                      798.2             -1.62
 Colombia peso                 3741.25              0.11
 Peru sol                       3.4767              0.12
 Argentina peso                69.6100             -0.33

 (Reporting by Ambar Warrick in Bengaluru; Editing by Bernadette
Nuestros Estándares:Los principios Thomson Reuters
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