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EMERGING MARKETS-Interest rate jitters, recession worries crush Latam FX

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      Eurozone business activity downturn feeds growth fears
    

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      Brazil's real leads declines among currencies
    

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      Hungary's economy to contract, per ministry forecast
    

  
    By Amruta Khandekar
       Sept 23 (Reuters) - Brazil's real dropped over 2% on
Friday, leading sharp declines across Latin American currencies
as fears that aggressive interest rate hikes by major central
banks could cause a global recession drove the safe-haven dollar
to fresh 22-year highs. 
    Surveys showing a drop in business activity across the euro
zone and Britain fueled fears of a global economic downturn,
adding to jitters around interest rate hikes by the Federal
Reserve and other central banks this week.
    The Brazilian real's decline was despite
central bank intervention, selling $2 billion in the spot market
with a repurchase agreement.
    The currency was on track for its sharpest one day fall in
11 weeks. Still, the real was set to end the week higher,
outperforming emerging market peers. 
    As concerns about weaker demand hit crude and metal prices,
currencies of Mexico and Colombia fell 0.7% and
nearly 1%, respectively, while top copper exporter Chile's peso
 fell 2%, hitting its lowest in over two months.

    "Risk assets are under pressure while demand for USD
continues and I see little chance of that changing anytime
soon," said Christian Lawrence, senior cross-asset strategist at
Rabobank. "Latin America should outperform CEE (Central and
Easten Europe) and Asia though."
    Most Latam central banks started their hiking cycles early
and went big, helping them stay ahead of the Fed. They also
benefited from the rise in commodity prices earlier this year. 
    The Brazilian real has seen volatility in the run-up to
elections in October, but has still gained 7% so far this year.
    Brazil's presidential frontrunner Luiz Inacio Lula da Silva
slightly boosted his lead over incumbent President Jair
Bolsonaro to 14 percentage points, a poll showed.
    The country's government estimated on Thursday it will post
a primary surplus this year, the first since 2013.
    "(Brazil's) fiscal revenues have consistently surprised on
the upside over the past 12 months. The outlook for 2023 remains
much more challenging, largely because of the massive increase
in election-related government spending," wrote Elizabeth
Johnson, managing director of Brazil Research at TS Lombard in a
note.
    Meanwhile, Hungary's economy is set to contract for several
quarters from the end of this year, with growth only expected to
return in late-2023, based on a forecast by the country's
finance minister. The forint edged lower against the
euro.
    The National Bank of Hungary is likely to raise its base
rate by another 100 basis points to 12.75% next Tuesday, a
Reuters poll showed.
    Mexico and Colombia are also due to announce interest rate
decisions next week.
    Key Latin American stock indexes and currencies:
                                       Latest       Daily %
                                                    change
 MSCI Emerging Markets                   903.79          -2.04
 MSCI LatAm                             2111.64          -3.81
 Brazil Bovespa                       111088.62          -2.61
 Mexico IPC                            45182.35          -2.47
 Chile IPSA                             5220.61          -1.55
 Argentina MerVal                     143712.71         -3.859
 Colombia COLCAP                        1178.63          -1.91
                                                              
            Currencies                 Latest       Daily %
                                                    change
 Brazil real                             5.2360          -2.32
 Mexico peso                            20.1425          -1.05
 Chile peso                               968.9          -2.58
 Colombia peso                          4434.11          -1.68
 Peru sol                                3.9073          -0.88
 Argentina peso (interbank)            145.4500          -0.19
                                                 
 (Reporting by Amruta Khandekar; Editing by Andrea Ricci)
  
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