November 27, 2018 / 2:50 PM / 2 years ago

EMERGING MARKETS-Real, peso retrace losses after sharp declines

    By Sruthi Shankar
    Nov 27 (Reuters) - The Brazilian real rose more than 1
percent on Tuesday, a day after suffering its worst losses in
more than 18 months, while Mexico's peso stemmed a three-day run
of declines even as the dollar strengthened broadly.
    The currencies took a beating on Monday as political
uncertainties, trade worries and expectation of higher U.S.
interest rates sent Latin American assets tumbling.
    The real rose to 3.897 to the dollar on Tuesday,
after Brazil's central Bank announced an auction of $2 billion
on Tuesday aimed at providing liquidity to the markets at a time
when companies usually send funds abroad.
    "The development yesterday in BRL was very unusual. We don't
think BRLUSD should be at 3.90, we see it a bit lower," said
Michael Bolliger, head of EM Asset Allocation at UBS Global
Wealth Management in Zurich.
    "There's some seasonality here. Companies might send
dividends back to their headquarters and trading has not been
super-liquid and maybe it looks a lot worse that it actually
    Investors are focused on the team that Brazilian
President-elect Jair Bolsonaro is forming and specifically on
the new government's efforts to reduce Brazil's high fiscal
deficit, including plans for an overhaul of the pension system.
    The main Bovespa index also recovered after two days
of losses, supported by financial stocks. 
    The Mexican peso gained 0.5 percent, with Mexico's
incoming finance minister assuring investors that he would push
for a larger primary budget surplus next year.
    The country's main stock index closed at its lowest
level since March 2014 amid concerns about policies under
President Andres Manuel Lopez Obrador's incoming leftist
government as well as tensions on the U.S.-Mexico border.
    "You have a narrative in Mexico that is increasingly
concerning for outside investors. It's a broad narrative about
policy and political uncertainty," Bolliger added.
    The global backdrop was not favorable too, investors said. 
    The dollar rallied against a basket of major currencies
after U.S. President Donald Trump said that he would push ahead
with tariffs on Chinese goods ahead of a high-stakes meeting
between the presidents of both the countries at a G20 summit in
Argentina over the weekend.
    Key Latin American stock indexes and currencies at 1428 GMT
 Stock indexes                        daily %    YTD % change
 MSCI Emerging Markets       978.69      0.22           -15.7
 MSCI LatAm                 2498.07      0.13          -11.79
 Brazil Bovespa            85963.35      0.49           12.51
 Mexico IPC                       -         -               -
 Chile IPSA                 5120.67     -0.25           -0.25
 Argentina MerVal          31392.67      0.84            4.41
 Colombia IGBC                    -         -               -
 Currencies                           daily %    YTD % change
 Brazil real                 3.8910      0.63          -14.85
 Mexico peso                20.4178      0.97           -3.52
 Chile peso                   676.7      0.00           -9.17
 Colombia peso                    -         -               -
 Peru sol                         -         -               -

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Susan Thomas)
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