July 31, 2020 / 3:04 PM / 14 days ago

EMERGING MARKETS-Chilean peso set for best month ever; Brazil's real slips

    * Chilean peso bests regional peers with 8.6% jump in July
    * Brazil's real pressured by record deficit, debt figures
    * Colombia's peso lags in July on oil price outlook
    * Colombian central bank rate decision eyed 

    By Shreyashi Sanyal
    July 31 (Reuters) - Chile's peso rose on Friday and was set
for its best month on record, aided by improving signs of demand
for copper from top consumer China, while the Brazilian real
weakened after central bank figures showed a record rise in
national debt. 
    The peso gained 0.5% during the session and
outperformed its regional peers with an 8.6% jump in July.
Prices of copper, Chile's biggest export, ticked higher after
strong factory activity data from China. 
    Prolonged lockdown restrictions in Chile have also helped in
containing the spread of the novel coronavirus in the country. 
    Capital Economics analysts say Chile is seeing the fastest
decline in new per capita coronavirus cases of any major
emerging market.
    "If this trend continues, the drag from cautious household
behavior may fade more quickly in Chile than elsewhere in the
region."
    Commodity-linked currencies in Latin America have risen in
recent months due to a pick-up in demand in China, which is the
region's biggest importer of agricultural products and metals. 
    The MSCI's index for Latin American currencies
 rose 5.2% in July, set for its biggest monthly
gain in 2020 after the dollar tracked its worst month in
a decade, on doubts over a U.S. economic rebound as the country
struggles to contain its coronavirus outbreak.
    Emerging market currencies have also seen buying in July on
a weakening U.S. dollar and excess liquidity stemming from
stimulus packages in developed markets. 
    Brazil's real fell more than 1% after the country's
national debt rose to a record 85.5% of gross domestic product
and the public sector registered a record $36.5 billion primary
deficit in June. 
    The currency of Latin America's biggest economy was still
set for a monthly gain of nearly 5%, with investors keeping a
close eye around developments on a new tax reform. 
    Economy ministry estimates say the creation of a new
value-added tax in Brazil by combining two federal taxes paid by
companies could generate up to 373,000 jobs.
    The Mexican peso continued to decline for the second
straight day, after data showed the economy shrunk by a
record-breaking 17.3% during the second quarter. The currency
was still up for the month.
    Colombia's peso lagged its regional peers in July,
hit by a worsening outlook for oil prices tied to a decline in
demand from the United States.
    Market participants also awaited a policy decision from
Colombia's central bank, which is expected to cut its benchmark
interest rate for the fifth consecutive month by 25 basis points
later on Friday.      
    Key Latin American stock indexes and currencies:
    
 Stock                              Latest     Daily % change
   indexes                                     
 MSCI Emerging Markets              1077.76    -0.4
                                               
 MSCI LatAm                         2070.46    -1.5
                                               
 Brazil Bovespa                     103862.85  -1.09
 Mexico IPC                         36754.71   -1.03
 Chile IPSA                         3970.55    0.44
 Argentina MerVal                   49071.78   -0.676
 Colombia COLCAP                    1156.25    -0.72
                                               
 Currencies                         Latest     Daily % change
 Brazil real                        5.2177     -1.17
 Mexico peso                        22.1670    -0.74
 Chile peso                         757.4      0.46
 Colombia peso                      3732.36    -0.30
                                               
 Peru sol                           3.5248     -0.37
 Argentina peso (interbank)         72.3100    -0.07
                                               
 Argentina peso (parallel)          132        2.27
                                               
 

 (Reporting by Shreyashi Sanyal in Bengaluru
Editing by Paul Simao)
  
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