Bonds News

EMERGING MARKETS-Chilean, Mexican pesos hit 2-week lows as Middle East tensions rise

 (Updates prices)
    By Susan Mathew
    Jan 3 (Reuters) - The Chilean and Mexican pesos slid to
two-week lows against the dollar as investors turned risk averse
after a U.S. air strike in Iraq killed a top Iranian commander,
causing tensions to flare in the Middle East. 
    Major-General Qassem Soleimani, head of Iran's elite Quds
Force, died in an air strike on Baghdad airport, prompting
Iran's Supreme Leader Ayatollah Ali Khamenei to vow harsh
revenge. Leaders from many other voiced concerns and urged
    "The U.S. air attacks on Iran have triggered a flight to
'safe havens' in the currency market," Ulrich Leuchtmann, head
of FX and commodity research at Commerzbank, wrote in a note. 
    "EM currencies are the losers ... The reflex of the currency
market is to do what has worked in similar situations in the
    MSCI's index for Latin American currencies
dropped 0.5% against a steady dollar. Brazil's real
weakened 0.7%, while Chile's peso dropped almost 2% with
a slide in prices of the country's main export, copper,
exacerbating its decline.
    "It (Iran) would certainly have to weigh the risk of a
significant military conflict with the U.S., a possibility that
market participants may now have to take into account," Elwin de
Groot, head of macro strategy at Rabobank, wrote in a note. 
    Mexico's peso weakened to 18.923 per dollar. With
Mexico's economy flailing, investors now worry that the state
itself may be a downgrade risk for oil firm Pemex whose bonds
were saved from being labeled junk last year thanks to measures
taken by the government.
    Crude exporter Colombia's peso, meanwhile, held
steady as oil prices surged more than 3%.
    Regional stocks fell 0.6%, with Brazil'
state oil company Petrobras being one of the biggest
weights on Sao Paulo's Bovespa index after the country's
President Jair Bolsonaro warned the rise in fuel prices could
hit the firm.
    Stocks in Chile, Mexico and Colombia
, however, eked out gains. 
    Over the week, progress in trade talks between Washington
and Beijing and policy easing from China had helped raise demand
for riskier Latin American assets, putting the equity index on
course for its fifth straight week in the black.
    Latam's currencies index, on the other hand, is set to snap
a four-week winning streak as it eyed a flat end to the week.   
    Key Latin American stock indexes and currencies at 1930 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets         1123.30     -0.42
 MSCI LatAm                    2962.35     -0.72
 Brazil Bovespa              118130.01     -0.37
 Mexico IPC                   44487.29      0.11
 Chile IPSA                    4839.40      0.72
 Argentina MerVal             40332.50    -1.884
 Colombia COLCAP               1663.40      0.28
       Currencies             Latest    Daily %
 Brazil real                    4.0536     -0.71
 Mexico peso                   18.9237     -0.48
 Chile peso                      756.2     -0.73
 Colombia peso                    3250     -0.03
 Peru sol                        3.315     -0.48
 Argentina peso                59.8150      0.00

 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru
Editing by Paul Simao)