August 9, 2018 / 3:51 PM / 4 months ago

EMERGING MARKETS-Trade war, domestic politics pressure LatAm currencies

    SAO PAULO, Aug 9 (Reuters) - Major Latin American currencies
fell against the dollar on Thursday amid a strengthening
greenback and political uncertainty in Brazil as Latin America's
largest economy heads into a presidential election.
    The dollar gained against most currencies as investors bet
that trade war rhetoric and a strong U.S. economy would continue
to aid the currency. Trade tensions are seen as beneficial for
the U.S. dollar as the economy is better placed to handle
protectionism than emerging markets, and tariffs may narrow the
U.S. trade deficit.
    Late on Wednesday, Chinese state media accused the United
States of having a "mobster mentality," while a key World Trade
Organization metric indicated that global trade in goods is
likely to lose momentum in the third quarter.

    Brazil's real currency was especially hard hit, after two
polls showed right-wing populist Jair Bolsonaro tying with
market-friendly centrist Geraldo Alckmin in the key state of Sao
Paulo ahead of the October presidential election. Traders were
also spooked by a Supreme Court decision increasing some
government salaries by over 16 percent in 2019.
    "Apparently, the powers that be do not understand the
seriousness of Brazil's fiscal situation," said Alvaro Bandeira,
head economist at brokerage Home Broker ModalMais.
    Brazil's real had fallen 1.25 percent in trade, while
the Mexican pesoMXN=D2> was off 1.16 percent and the Chilean
peso was off a more modest 0.26 percent.
    In equities markets, the biggest major mover was Argentina's
benchmark Merval index, which rose over 2 percent after
an unfolding corruption probe there hit the index hard in recent
sessions.
    The Argentine index had climbed 2.06 percent in mid-day
trade amid what traders called a technical correction, after the
index fell 8.71 percent Monday through Wednesday.
    
Key Latin American stock indexes and currencies at 1514 GMT: 
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets         1078.36     -0.13      -6.8
                                                  
 MSCI LatAm                    2649.84     -1.99     -4.41
                                                  
 Brazil Bovespa               78644.74     -0.64      2.94
                                                  
 Mexico IPC                   49687.00     -0.42      0.67
                                                  
 Argentina MerVal             27224.77      2.06     -9.45
                                                  
 Colombia IGBC                12060.89     -1.05      6.07
                                                  
 Venezuela IBC               104527.39      2.37   8175.20
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.8127     -1.25    -13.10
                                                  
 Mexico peso                   18.6870     -1.16      5.42
                                                  
 Chile peso                     646.55     -0.26     -4.93
                                                  
 Colombia peso                 2920.76     -0.41      2.10
 Peru sol                        3.272     -0.09     -1.07
                                                  
 Argentina peso                27.9500     -1.07    -33.45
 (interbank)                                      
                                                  
 Argentina peso                   27.9     -0.36    -31.08
 (parallel)                                       
                                                  
 

 (Reporting by Gram Slattery;
Additional reporting by Jorge Otaola in Buenos Aires and Tom
Finn in London
Editing by Alistair Bell)
  
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