June 10, 2019 / 7:53 PM / a year ago

EMERGING MARKETS-Mexican peso firms on deal to avoid U.S. tariffs

 (Recasts with Latin American currencies, updates prices, adds
market strategists' quote)
    By Sruthi Shankar
    June 10 (Reuters) - The Mexican peso was on track on Monday
to post its biggest one-day percentage gain of 2019 after the
country struck a migration deal with the United States to avoid
higher tariffs on its exports, although a firm dollar kept other
Latin American currencies under pressure.
    The peso, which has shed more than 2.5% since U.S.
President Donald Trump's threat last month to impose 5% levies
on all Mexican goods from Monday, recouped much of the losses to
trade up 2.3% at 19.18 per dollar.
    Worries that Latin America's second-largest economy could
slip into a recession if Trump made good on his promise to
impose tariffs have sent shivers through financial markets
already reeling from a U.S.-China trade dispute.
    "It seems to me in the short term, the peso is
well-positioned to go back to the 19 (per dollar) level," said
Bertrand Delgado, emerging market strategist with Societe
Generale in New York.
    Mexico on Friday agreed to rapidly expand a controversial
asylum program and deploy security forces to stem the flow of
illegal Central American migrants.
    Trump did not provide details of the deal reached last week,
but threatened tariffs if Mexico's Congress did not approve the
    "The trade news is obviously a positive, but as we go into
the second half, we might start seeing some weakening pressure
from the economy continuing to slowdown and the central bank
might move toward a more dovish stance toward the end of the
year," Delgado said.
    Stocks in Mexico shrugged off the trade threats to
trade up 0.34%.
    Elsewhere, Brazil's real was tepid against the
dollar, which rebounded from last week's lows.
    Political tensions also added to the woes after a news
website published messages dating back years showing Brazil's
Justice Minister Sergio Moro closely coordinating with
prosecutors working on the "Car Wash" investigations, that
included a case that convicted and imprisoned former President
Luiz Inacio Lula da Silva.
    "These new revelations may result in a delay in Congress'
pension reform debate," Peter Cecchini, chief market strategist
at Cantor Fitzgerald, wrote in a research note.
    Brazil's Bovespa stock index edged down 0.15%, hurt
by losses in the financial sector, also sensitive to news on the
country's pension reforms.
    Shares of Banco Bradesco SA and Itau Unibanco
 fell 1.2% each after Goldman Sachs started coverage
on the banks with a "sell" rating, saying valuations and
earnings estimates appeared too high.
    Chile's peso declined 1.0% after its central bank
unexpectedly cut the benchmark interest rate by 50 basis points
to 2.5% on Friday as it braced for a sharper economic slowdown
because of the U.S.-China trade dispute.
    The bank also trimmed its estimate for the average price of
copper for 2019-21, citing the impacts the trade war on its top
  Key Latin American stock indexes and currencies at 1921 GMT:
 Stock indexes               Latest        Daily
 MSCI Emerging Markets         1,022.51      1.5
 MSCI LatAm                    2,749.23     0.14
 Brazil Bovespa               97,669.69    -0.15
 Mexico IPC                   43,437.78     0.34
 Chile IPSA                    5,011.90     1.23
 Argentina MerVal             36,323.43     1.85
 Colombia IGBC                12,277.26     0.19
 Currencies                                Daily
                                 Latest   change
 Brazil real                     3.8773    -0.01
 Mexico peso                    19.1790     2.25
 Chile peso                       698.8    -1.00
 Colombia peso                 3,255.64     0.33
 Peru sol                         3.333    -0.18
 Argentina peso (interbank)     44.8750     0.01
 (Reporting by Sruthi Shankar in Bengaluru, editing by G Crosse)
Nuestros Estándares:Los principios Thomson Reuters
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