March 23, 2020 / 3:05 PM / 18 days ago

EMERGING MARKETS-Most Latam FX fall but dented dollar caps losses

    By Susan Mathew
    March 23 (Reuters) - Mexico's peso slipped to new lows on
Monday, and Brazil's real also weakened amid worries over a deep
global recession but the U.S. Federal Reserve's new aggressive
credit boost dented the dollar, capping losses in regional
currencies.  
    The new programs mean the Fed will lend against student
loans, credit card loans, and U.S. government backed-loans to
small businesses, and buy bonds of larger employers and make
loans to them in what amounts to four years of bridge financing.

    The dollar hit session lows on the news, while Wall Street
indexes jumped before opening in negative territory.
    Brazil's Bovespa stock index fell 3.3%, and was
heading back to lows not seen in since 2017. Brazil's real
 weakened 0.5%, in what could be its third straight day of
gains. The currency had firmed briefly after the Fed
announcement. 
    Brazil's central bank on Monday said it will extend loans
backed by corporate bonds to banks between March 23 and April
30, in a move to add liquidity to the financial
system.
    Broader emerging markets declined
as investors worried about the extent of a global recession. As
more and more countries go into lockdowns, drastic measures
taken by central banks and governments may prove insufficient
compared with the loss in economic activity.

    Goldman Sachs said it expected global real gross domestic
product to contract by about 1% in 2020, a sharper economic
decline than in the year following the 2008 global financial
crisis.
    In line with a decline in oil prices, Mexico's peso
weakened to 24.955 to the dollar, before cutting some
losses.
    Mexico's central bank on Friday announced a 50 basis point
cut - its biggest cut in six years - in an out-of-cycle move,
and pledged support for the financial markets as part of more
aggressive measures to cushion the economy from the coronavirus
fallout. 
    "We welcome the central bank's announcements, as we think
they will foster more orderly trading conditions in the local
fixed income market, as well as in the currency market," wrote
Credit Suisse analysts Alonso Cervera and Alberto J Rojas in a
note. 
    "We also think that given the projected sharp drop in
economic activity, the bank will continue to lower the overnight
rate by at least another 200 bps to 4.5%, in the next six
months."
    Financial markets in Colombia and Argentina were closed for
local holidays. 
    
    Key Latin American stock indexes and currencies at 1444 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     760.11    -5.37
                                   
 MSCI LatAm               1423.97    -4.75
                                   
 Brazil Bovespa          64882.74    -3.26
                                   
 Mexico IPC              33369.14    -2.63
                                   
 Chile IPSA               3040.04    -1.21
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.0889    -1.26
                                   
 Mexico peso              24.7710    -1.41
                                   
 Chile peso                 860.4     0.31
                                   
 Peru sol                   3.512     0.45
                                   
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell)
  
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