June 11, 2018 / 10:09 PM / in 8 days

EMERGING MARKETS-Brazil's real, Mexico's peso struggle as politics, trade weigh

 (Updates prices)
    By Bruno Federowski
    BRASILIA, June 11 (Reuters) - The Brazilian real weakened on
Monday, in its first session after posting its largest daily
gain in a decade on Friday following the central bank's
intervention to bolster the currency.
    The real dropped about 0.5 percent against the dollar
on Monday, despite having been in positive territory earlier in
the day, while the Bovespa stock index fell for the fifth
straight session.
    The Mexican peso, which has been dogged by fears
that U.S. President Donald Trump may scrap the North American
Free Trade Agreement (NAFTA) between the United States, Canada
and Mexico, fell nearly 1.5 percent, while most other Latin
American currencies also retreated.
    The real had surged on Friday after the central bank said
the bank could offer as much as $20 billion worth of new
currency swaps, which function like dollar sales for future
delivery, to provide liquidity and cushion the currency's
selloff earlier in the week.
    "The bank cannot be predictable, otherwise it may end up
setting up a floor and a ceiling for the currency, so that keeps
the market on its toes," a manager at a São Paulo-based
brokerage said.
    For months, analysts and investors have warned that concerns
over Brazil's fiscal outlook and this year's presidential
elections have left the currency more vulnerable to sudden
swings in demand for emerging market assets.
    Those warnings proved to be well founded over the last few
weeks as bets on accelerating U.S. inflation, a widening U.S.
fiscal deficit, fears of a global trade war and geopolitical
tensions drove worldwide risk aversion, leading many investors
to start to unwind bets on emerging market assets.
    The selloff gained further impetus on Monday after Trump
lashed out at Canada and Europe over the U.S. trade deficit.

    Brazil's benchmark Bovespa stock index fell for the
fifth straight session, reaching its lowest level since December
2017.
    Key Latin American stock indexes and currencies at 1956 GMT:
    
 Stock indexes                            daily %     YTD %
                         Latest            change    change
 MSCI Emerging Markets         1137.76       0.21     -1.99
                                                   
 MSCI LatAm                    2488.21       0.63    -12.57
                                                   
 Brazil Bovespa               72357.24       -0.8     -5.29
                                                   
 Mexico IPC                   46299.76       0.78     -6.19
                                                   
 Chile IPSA                    5521.31      -0.03     -0.78
                                                   
 Chile IGPA                   27928.92      -0.03     -0.19
                                                   
 Argentina MerVal             31716.35       0.87      5.49
                                                   
 Colombia IGBC                12251.57      -0.09      7.75
                                                   
 Venezuela IBC                42005.11        3.6   3225.45
                                                   
                                                           
 Currencies                               daily %     YTD %
                                Latest     change    change
 Brazil real                    3.7226      -0.45    -11.00
                                                   
 Mexico peso                   20.5780      -1.38     -4.27
                                                   
 Chile peso                      632.2      -0.28     -2.78
                                                   
 Colombia peso                 2862.75      -0.25      4.17
                                                   
 Peru sol                        3.265      -0.12     -0.86
                                                   
 Argentina peso                25.9900      -2.39    -28.43
 (interbank)                                       
                                                   
 Argentina peso                     26      -0.77    -26.04
 (parallel)                                        
                                                   
 
 (Reporting by Bruno Federowski
Additional reporting by Paula Laier and Claudia Violante in São
Paulo
Editing by Paul Simao and Rosalba O'Brien)
  
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