May 3, 2018 / 4:57 PM / a year ago

EMERGING MARKETS-Argentine peso hits new lows as central bank fails to calm markets

    SAO PAULO, May 3 (Reuters) - The Argentine peso hit a new
all-time low on Thursday, dropping for the second straight day
despite a dramatic rate hike, indicating investors are jittery
about a market-friendly transition in Argentina that has
advanced in fits and starts.
    In early afternoon trade, the currency had fallen
2.53 percent to 21.75 pesos to the dollar, even as the bank
hiked the benchmark interest rate 300 basis points to 33.25
percent, its second surprise hike in less than a week.

    Traders said investors remained nervous about the direction
of Argentina as a whole, as the prospects of reducing utility
subsidies grow politically more difficult and a new tax regime
that went into effect last month made many investments less
attractive for foreigners.
    In April, members of President Mauricio Macri's coalition
proposed postponing cuts to gas and electricity consumption
subsidies, spooking markets.
    "The government has a fiscal deficit and is depending on the
reduction of subsidies, but now the opposition is mobilizing and
could stop the subsidy reduction," said Camilo Tiscornia,
director of C&T Asesores Economicos.
    Elsewhere in the region, currencies were mainly flat against
the dollar, though Colombia's peso was off nearly 1
percent as prices for oil took a slide, following U.S. equity
    Regional equities markets were mainly down as trade jitters
weighed on sentiment ahead of a U.S. trade visit to China.

    U.S. Treasury Secretary Steven Mnuchin has arrived in
Beijing for talks on tariffs, but with state media saying China
will stand up to the United States and the U.S. delegation
slated to leave as early as Friday, there is little expectation
of a breakthrough.
    Brazil's benchmark Bovespa was also weighed down by some
poor corporate results, with shares in fuel retailer Ultrapar
Participações SA tanking some 10 percent after
reporting a first-quarter profit fall of almost 80 percent.
    "The stock market's movement is tied to what's going on
abroad, while the local situation isn't helping," said one Rio
de Janeiro-based trader.
    Brazil's Bovespa and Mexico's IPC were down
1.43 percent and 1.47 percent, respectively. Chile's IPSA
 index and Argentina's Merval both also fell over
0.5 percent.
Key Latin American stock indexes and currencies at 1623 GMT:
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets         1137.43     -1.22     -0.61
 MSCI LatAm                    2855.49     -1.35      2.35
 Brazil Bovespa               83340.71     -1.43      9.08
 Mexico IPC                   47107.70     -1.47     -4.55
 Chile IPSA                    5651.43     -0.77      1.56
 Chile IGPA                   28471.25     -0.62      1.75
 Argentina MerVal             29331.39     -0.95     -2.44
 Colombia IGBC                12389.61      -0.3      8.96
 Venezuela IBC                22224.35      2.37   1659.45
 Currencies                              daily %     YTD %
                                          change    change
 Brazil real                    3.5421      0.16     -6.46
 Mexico peso                   19.1220     -0.17      3.02
 Chile peso                     619.65     -0.19     -0.81
 Colombia peso                 2862.85     -1.06      4.16
 Peru sol                        3.276     -0.24     -1.19
 Argentina peso                21.7500     -2.53    -14.48
 Argentina peso                   21.3     -0.94     -9.72

 (Reporting by Gram Slattery; additional reporting by Eliana
Raszewski in Buenos Aires
Editing by Susan Thomas)
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