January 23, 2018 / 3:36 PM / 9 months ago

EMERGING MARKETS-LatAm currencies weaken on U.S. protectionism fears

    By Bruno Federowski
    BRASILIA, Jan 23 (Reuters) - Latin American currencies
weakened on Tuesday as concerns over potential U.S.
protectionism lifted the U.S. dollar from an early-year selloff.
    U.S. President Donald Trump slapped steep tariffs on
imported washing machines and solar panels on Monday, measures
that some feared could be just the beginning in a wider
protectionist swing. 
    China and South Korea condemned the measure, with Seoul set
to complain to the World Trade Organization (WTO) over the
"excessive" move.
    The increased tensions drove traders to book profits on
risky assets, fearful that the tariffs could weigh on global
growth. High-yielding assets had kick-started the year with a
rally in the wake of stronger-than-expected activity figures
worldwide.
    "Risk aversion appears to be dominating as market
participants consider the implications of an escalation in trade
tensions between the U.S. and China," analysts at Scotiabank
wrote in a client note.
    The Mexican peso and the Brazilian real led
the losses. 
    Mexico's currency was particularly vulnerable to
protectionism talk as negotiations over the North American Free
Trade Agreement (NAFTA) dragged on.
    A Reuters poll showed the peso would take a bigger hit if
U.S. President Donald Trump kills NAFTA than from an election
victory for the country's left-wing presidential hopeful.

    Meanwhile, investors in Brazil were cautious ahead of the
trial of former President Luiz Inácio Lula da Silva, who is
leading voting intention polls for this year's elections.
    Lula has vowed to reverse part of President Michel Temer's
reform agenda if elected, but he could be barred from running if
a higher court upholds his conviction for corruption at trial on
Wednesday.
    
    Key Latin American stock indexes and currencies at 1520 GMT:
 Stock indexes                                  daily %    YTD %
                                     Latest      change   change
 MSCI Emerging Markets               1249.56       0.89     6.91
 MSCI LatAm                          3048.22      -1.31     9.22
 Brazil Bovespa                     80938.00       -0.9     5.94
 Mexico IPC                         49996.67       0.04     1.30
 Chile IPSA                          5811.70      -0.28     4.44
 Chile IGPA                         29212.34      -0.26     4.40
 Argentina MerVal                   33764.77       0.71    12.30
 Colombia IGBC                      12013.83        0.3     5.66
                                                                
 Currencies                                     daily %    YTD %
                                                 change   change
                                      Latest             
 Brazil real                          3.2328      -0.75     2.49
 Mexico peso                         18.8325      -0.78     4.60
                                                         
 Chile peso                           608.96      -0.67     0.93
 Colombia peso                       2862.11      -0.41     4.19
 Peru sol                              3.217      -0.12     0.62
 Argentina peso (interbank)          19.3350      -0.97    -3.80
                                                         
 Argentina peso (parallel)             19.87      -0.35    -3.22
                                                         
 
 (Reporting by Bruno Federowski; Editing by Jonathan Oatis and
Nick Zieminski)
  
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