April 23, 2020 / 2:19 PM / a month ago

EMERGING MARKETS-Brazil's real eyes record low as risk aversion batters Latam

    * Real briefly hits record low of 5.4687 
    * Brazilian rate cut bets rise
    * Mexican peso down as inflation slows
    * Latam stocks slightly up

    By Ambar Warrick
    April 23 (Reuters) - Brazil's real eyed a fresh record low
on Thursday, while other Latin American currencies were muted as
markets mulled over increasingly dire economic readings due to
the coronavirus.  
    The real was slightly off a new record low of 5.4687
to the dollar touched earlier in the day, as worries mounted
over how Latin America's largest economy would handle the
pandemic.
    The Brazilian government faces the challenge providing
stimulus without blowing up the country's budget deficit.
    "Speculation is rampant that the central bank might even cut
its key rate by 75 basis points in early May, which is putting
pressure on the real," wrote Antje Praefcke, FX and EM analyst
at Commerzbank. 
    "The government signaled a recovery plan for the economy,
but national finances remain overstretched, making the real one
of the hardest hit currencies during the crisis... That is
unlikely to change significantly short term."
    The real has shed nearly 36% this year, making it one of the
worst performing emerging market currencies.
    A continued, albeit slowing jump in U.S. jobless claims,
coupled with data showing business activity plummeting in the
U.S. and euro zone spurred further risk aversion, pointing to
further losses in emerging markets.
    The readings offset optimism over stimulus measures across a
number of developed and developing markets, as governments race
to stymie the economic impact of the coronavirus.
     Most other Latin American currencies traded in a
flat-to-low range to the dollar, while the MSCI's index of
regional currencies closed in on lows touched
during the peak of the March risk asset rout. 
    Mexico's peso fell as inflation in the first half of
April slowed to its lowest in more than four years, potentially
giving the central bank more room to trim borrowing costs.
 
    The bank had unexpectedly cut rates earlier in the week. 
    The Argentine peso hit a record low, while bond
prices fell after the country missed a bond interest payment due
on Wednesday, ramping up fears that it could default on its
sovereign debt.
    Latin American equities fared better than currencies for the
day, tracking some strength on Wall Street. Bourses in Brazil
, Chile and Mexico added between 0.2% to
0.8%.

    Key Latin American stock indexes and currencies at 1404 GMT
    
    Stock indexes             Latest        Daily % change
 MSCI Emerging Markets          893.64                    0.56
                                        
 MSCI LatAm                    1616.63                   -0.25
                                        
 Brazil Bovespa               80977.44                    0.36
                                        
 Mexico IPC                   34343.94                    0.35
                                        
 Chile IPSA                    3702.03                    0.64
                                        
 Argentina MerVal                    -                       -
                                        
 Colombia COLCAP               1135.08                     0.2
                                        
                                                              
       Currencies             Latest        Daily % change
 Brazil real                    5.4548                   -0.84
                                        
 Mexico peso                   24.5798                   -0.46
                                        
 Chile peso                      858.2                   -0.14
                                        
 Colombia peso                 4030.86                   -0.21
 Peru sol                       3.3757                   -0.15
                                        
 Argentina peso                66.3100                   -0.12
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru
Editing by Alistair Bell)
  
Nuestros Estándares:Los principios Thomson Reuters
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