November 13, 2017 / 3:10 PM / a year ago

EMERGING MARKETS-Mexican peso slips ahead of NAFTA trade talks

    By Bruno Federowski
    SAO PAULO, Nov 13 (Reuters) - The Mexican peso slipped on
Monday ahead of the latest round of trade negotiations between
Mexico, the United States and Canada later this week.
    Concerns that U.S. President Donald Trump could make good on
his threats to scrap the North American Free Trade Agreement
(NAFTA) have battered the Mexican currency in recent weeks.
Trump has put forward increasingly strict demands in the
    "The market is no longer optimistic on seeing any
significant gain in this round of negotiations, and is actually
concerned that differences will widen," economists at Continuum
Economics wrote in a client note.
    Mexico sells over three-quarters of its exports to the
United States.
    Nevertheless, losses in the Mexican currency have been
limited by the Mexican central bank's assurance that it could
act to cushion the currency's decline.
    The central bank has sold foreign hedges repeatedly in a bid
to curb potential inflationary pressure from a weaker currency.
In its last policy statement, the bank flagged risks to
inflation saying it was necessary to maintain a prudent monetary
policy given multiple risks faced by the economy, including
trade with the United States.
    The peso fell 0.3 percent on Monday, in line with
other Latin American currencies. The Brazilian real
weakened 0.3 percent, while the Colombian peso dipped 0.2
    Emerging market currencies have seen some volatility in
recent weeks as the outlook for a U.S. tax overhaul became
increasingly unclear. 
    Many investors had bet on further losses in emerging markets
in case Trump's tax plan stoked inflation and forced the Federal
Reserve to hike interest rates faster than expected.
    But lawmakers' resistance to such plans has reduced such
prospects. Senate Republicans have unveiled a new tax plan that
differs from the version in the House of Representatives, and
there are few signs of a compromise.
    Brazil's benchmark Bovespa stock index was nearly
flat as concerns over President Michel Temer's ability to pass a
constitutional amendment streamlining the social security system
    Units, a blend of common and preferred shares, in Renova
Energia SA slumped nearly 9 percent after Brookfield
Asset Management Inc unveiled a binding proposal for
the renewable energy firm below Friday's closing price.

    Key Latin American stock indexes and currencies at 1450 GMT:
 Stock indexes                              daily %    YTD %
                                             change   change
 MSCI Emerging Markets            1122.96     -0.49    30.87
 MSCI LatAm                       2730.93     -0.89    17.72
 Brazil Bovespa                  72224.41      0.08    19.92
 Mexico S&P/BVM IPC              47724.90     -0.63     4.56
 Chile IPSA                       5371.67     -0.43    29.39
 Chile IGPA                      27065.99      -0.4    30.54
 Argentina MerVal                26960.50     -0.44    59.36
 Colombia IGBC                   10761.69     -0.42     6.26
 Venezuela IBC                     658.68      0.44   -97.92
 Currencies                                 daily %    YTD %
                                             change   change
 Brazil real                       3.2867     -0.25    -1.14
 Mexico peso                      19.1600     -0.30     8.27
 Chile peso                           633     -0.28     5.96
 Colombia peso                       3013     -0.20    -0.38
 Peru sol                           3.243      0.00     5.27
 Argentina peso (interbank)       17.5500     -0.28    -9.54
 Argentina peso (parallel)          17.93      0.11    -6.19
 (Reporting by Bruno Federowski; Editing by Paul Simao)
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