June 6, 2018 / 9:38 PM / 4 months ago

EMERGING MARKETS-Brazil currency skids as election woes add to pessimism

 (Updates prices, adds El-Erian tweet starting in paragraph 5)
    SAO PAULO, June 6 (Reuters) - Brazil's real currency
hit a new two-year low on Wednesday, even as its Latin American
peers gained against a weakened dollar, underlining the level of
investor concern for a country coming off a massive truckers'
strike and heading toward an unsettled election.
    Brazilian equities and the real have suffered a tough few
weeks after the truckers' protest hit all sectors of the
economy, while increasing state intervention in state oil major
Petroleo Brasileiro SA underlined the weakened
position of the market-friendly
government.
    A poll released on Tuesday heightened investors' concern
about general elections in October. It showed right-winger Jair
Bolsonaro and leftist Ciro Gomes as the front-runners, while
Geraldo Alckmin and Joao Doria, relative centrists who would be
welcomed by investors, lagged.
    "Clearly, the mood has changed," said Flavio Serrano, a
senior economist at Haitong Banco de Investimento in Sao Paulo.
"There's a negative outlook on Brazil, with regard to the
political situation and the economy."
    Brazil's real had fallen 1.21 percent by the afternoon,
trading at 3.85 reais to the dollar, its lowest level since
March 2016. The decline steepened after Allianz Chief Economic
Adviser Mohamed El-Erian suggested in a tweet that Brazil's
currency could face a bumpy ride going forward.
    El-Erian said the real's slide, which has totaled nearly 17
percent over the last three months, put the Brazilian central
bank "in quite a tricky position" adding that there was "little
room for error."      
    The country's benchmark Bovespa index fell 0.7
percent. 
    Among the major gainers in Latin American currency markets
on Wednesday was the Mexican peso, which rose 0.74
percent, as traders took a breather after rocky North American
Free Trade Agreement (NAFTA) news in recent weeks sent the
currency skidding.
    Analysts said the peso strengthened on comments from Mexican
Economy Minister Ildefonso Guajardo, who said on local radio
late on Tuesday that he saw a greater than 50 percent chance of
reaching an agreement in principle on NAFTA this year.
      
Key Latin American stock indexes and currencies at 1956 GMT:
    
 Stock indexes        Latest      Daily pct     YTD pct
                                     change      change
 MSCI Emerging          1,150.78       0.55       -1.21
 Markets                                     
 MSCI LatAm             2,510.31      -1.02      -10.32
                                             
 Brazil Bovespa        75,945.27      -0.91       -0.60
                                             
 Mexico IPC            45,202.65       0.16       -8.41
                                             
 Chile IPSA             5,497.17      -0.47       -1.21
                                             
 Chile IGPA            27,800.74      -0.46       -0.64
                                             
 Argentina MerVal      30,337.55      -0.07        0.90
                                             
 Colombia IGBC         12,276.74       -0.9        7.97
                                             
 Venezuela IBC         38,278.07       1.58     2930.39
                                             
                                                       
 Currencies               Latest  Daily pct     YTD pct
                                     change      change
 Brazil real              3.8329      -0.61      -13.56
                                             
 Mexico peso             20.2975       0.74       -2.95
                                             
 Chile peso                  628       0.64       -2.13
                                             
 Colombia peso           2,829.9       0.78        5.37
                                             
 Peru sol                  3.261       0.21       -0.74
                                             
 Argentina peso          24.8950       0.26      -25.29
 (interbank)                                 
                                             
 Argentina peso             25.5       1.57      -24.59
 (parallel)                                  
                                             
 
 (Reporting by Gram Slattery and Claudia Violante; additional
reporting by Julia Love; editing by Diane Craft)
  
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