May 2, 2019 / 3:16 PM / 19 days ago

EMERGING MARKETS-Latam FX weaken after U.S. Fed outlook, stocks drop

    By Aaron Saldanha
    May 2 (Reuters) - Latin American currencies softened against
a solid U.S. dollar on Thursday, a day after the U.S. Federal
Reserve kept interest rates steady and its Chair Jerome Powell
said policymakers saw no strong reason to raise or lower rates. 
    Most stock markets in Latin American broadly fell along with
their global peers, hurt especially sharply by weakness among
energy stocks on diving oil prices.    
    MSCI's index of Latin American currencies
fell 1.1%, pressured by the resolute dollar, and was on track
for its worst day in more than a month. 
    Powell's comments prompted interest rate markets to reduce
the priced-in expectation of seeing lower U.S. borrowing costs
by the end of 2019, supporting the dollar.  
    There was nothing from the policy statement or the press
conference to indicate the Fed was contemplating any near-term
changes to monetary policy, HSBC US Economist Ryan Wang wrote in
a note.   
    Brazil's real slid 1.3%, on course for its worst
one-day showing in more than a week. Growth in Brazilian
manufacturing activity slowed in April to its weakest pace in
six months, data showed.
    Brazilian stocks dropped 0.7%, weighed by losses
across most sectors.
    Prices of some local stocks adjusted for moves seen in their
corresponding American depository receipts (ADR) on Wednesday,
when equities in Sao Paulo did not trade due to a holiday for
Labor Day.
    Local shares of iron ore miner Vale SA fell 2.5%,
following Wednesday's 3.1% slide in its ADR.
    State-run oil firm Petroleo Brasileiro SA (Petrobras) saw
its common shares and preferred shares
fall 1.2% and 1.6%, respectively, amid a slide in oil prices 
 and a 2% fall on Wednesday in Petrobras' ADRs.  
  
    The Mexican peso softened 0.4%. The high-yielding
currency is popular among carry traders, who invest in it using
funds borrowed in low interest rate currencies, pocketing the
difference. 
    The peso has been broadly weaker over the past two weeks.
Simon Harvey, an FX market analyst at Monex Europe, said the
emerging market carry trade was "starting to seem like a crowded
trade."
    Argentina's peso softened, while stocks rose
2.3%, largely on gaining financials. 
    Colombia's peso weakened 0.9%, while stocks
slid 0.5%. Energy firm Ecopetrol SA tumbled 2.5%, hit
by weaker oil prices. 
        
    Latin American stock indexes and currencies at 1424 GMT
    
 Stock indexes                                 daily %
                                 Latest         change
 MSCI Emerging Markets             1080.18       -0.03
                                            
 MSCI LatAm                        2722.81       -1.62
                                            
 Brazil Bovespa                   95680.25        -0.7
 Mexico IPC                       44483.14       -0.26
 Chile IPSA                        5173.01       -0.27
                                            
 Argentina MerVal                 30240.95        2.26
                                            
 Colombia IGBC                    12712.26       -0.51
                                            
                                                      
 Currencies                                    daily %
                                                change
                                    Latest  
 Brazil real                        3.9644       -1.07
                                            
 Mexico peso                       19.0743       -0.42
                                            
 Chile peso                          684.3       -1.13
                                            
 Colombia peso                     3262.28       -1.07
 Peru sol                            3.313       -0.21
                                            
 Argentina peso (interbank)        44.8000       -1.14
                                            
 

 (Reporting by Aaron Saldanha in Bengaluru; Editing by
Bernadette Baum)
  
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