May 22, 2020 / 2:40 PM / 16 days ago

EMERGING MARKETS-Latam FX weaken on fears of escalation in U.S.-China trade tensions

    By Susan Mathew
    May 22 (Reuters) - Latin American currencies weakened on
Friday as risk sentiment took a hit after Hong Kong became the
latest front in intensifying tensions between Beijing and
Washington.
    As the dollar gained momentum, Mexico's peso broke a
four-day rally, down half a percent, while Brazil's real
slipped 0.3%. Tumbling oil prices pressured crude exporter
Colombia's peso, while Chile's currency traded
flat.
    China plans to impose a new national security legislation on
Hong Kong, a move that prompted a U.S. warning as a high-degree
of autonomy and respect for human rights were key to preserving
the territory's special status under U.S. law, which has helped
Hong Kong maintain its position as a world financial center.
 
    "The move risks triggering yet another round of tit-for-tat
escalation between the U.S. and China, which have seen ties
spiral to their worst in decades since COVID-19 began spreading
around the world," said Art Hogan, chief market strategist at
National Securities in New York.
    Regional stocks tracked Wall Street lower, with Brazil
shares retreating from near three-week highs.
    Mexico's main index fell 0.2% with eyes on
developments regarding the new rules in the energy sector.
Measures taken by the government in recent weeks to reduce the
influence of private energy producers provoked protests from the
European Union, Canada and Mexico's most powerful business
associations.
    Meanwhile, data showed inflation in the country accelerated
faster that expected in the first half of May, but the annual
rate still remained below the central bank's target rate.
  
    Citigroup analysts say the rates market will likely look
beyond Mexico's inflation number given that food price 
increases are likely seen as transitory by the central bank. 
    In Argentina, the government is planning to amend its offer
to creditors to restructure $65 billion in foreign debt, with
talks on a positive course, Economy Minister Martin Guzman told
Reuters. 
    On Thursday, the government extended a deadline for talks
with creditors to restructure around $65 billion in foreign debt
to June 2, as the two sides edge closer to a deal needed to
avert a messy default that would drag the country deeper into
crisis.
    
    Key Latin American stock indexes and currencies at 14:13
GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     904.32    -2.76
                                   
 MSCI LatAm               1651.62    -1.46
                                   
 Brazil Bovespa          81802.36    -1.48
                                   
 Mexico IPC              35502.59    -0.16
                                   
 Chile IPSA               3726.14    -0.77
                                   
 Argentina MerVal               -        -
                                   
 Colombia COLCAP          1057.53     -0.8
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.5968    -0.28
                                   
 Mexico peso              22.9575    -0.41
                                   
 Chile peso                 806.9    -0.52
                                   
 Colombia peso            3787.28    -0.72
                                   
 Peru sol                  3.4118    -0.03
                                   
 Argentina peso           68.1700    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;)
  
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