European Markets

Latam FX weaken on Omicron worries

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  • Mexican peso up almost 3% this week
  • Brazil industrial production disappoints
  • Peru's sol rises despite shutdown at Las Bambas copper mine

Dec 3 (Reuters) - Most Latin American currencies weakened on Friday, as worries about the new coronavirus variant, Omicron, persisted with Mexico reporting its first case, while Brazil's real was flat ahead of a central bank policy meeting next week.

The Mexican peso fell 0.5%, with officials urging calm after the Omicron case was detected. The case follows the discovery of the variant in Brazil earlier this week, its first known appearance in Latin America, a region particularly hard hit by the pandemic over the past two years.

But for the week, the peso was seen climbing almost 3%, far outperforming regional peers.

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Brazil's real steadied. Data on Friday showed industrial production fell 0.6% in October from September. This provides early evidence that Brazil's economy may be headed for another contraction this quarter, said William Jackson, chief EM economist with Capital Economics.

"This won't prevent (the central bank) from raising rates when it meets next week, but it adds to reasons to think that they won't up the pace of tightening and will stick to a 150bp rise (to 9.25%)."

The likely hike next week, to combat surging inflation, will have raised the benchmark Selic rate by 725 basis points this year.

Meanwhile, a report from the U.S. Treasury on Friday said no major trading partners, which include several emerging market economies, engaged in currency manipulation, elimination a source of uncertainty.

Peru's sol outperformed, up 0.2%, shrugging off yet another shutdown at MMG Ltd's (1208.HK) Las Bambas copper mine from mid-December as talks to end a road blockade fail. read more

Peru's finance ministry said on Thursday that International Monetary Fund officials had concluded there is leeway in the country's tax system for a reform to include higher taxes on the key mining sector. read more

Uncertainty about the U.S. Federal Reserve's next move also persisted after U.S. jobs growth missed estimates by a huge margin, but the unemployment rate fell. read more

Mexican peso races past EM peers

In Chile, Congress rejected a bill to allow Chileans to make a fourth withdrawal from their pension funds, spelling the end for now of a proposal that had been criticized by the central bank and opposed by the center-right government of President Sebastian Pinera.

But Chile's currency fell 0.3%, as copper prices eased.

While most Latam stocks benchmarks fell, Brazil's (.BVSP) rose 0.6%, led by fintech company Meliuz (CASH3.SA) which surged 19% after stellar Black Friday sales.

Key Latin American stock indexes and currencies:

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Reporting by Ambar Warrick and Susan Mathew Editing by Mark Heinrich and Alistair Bell

Our Standards: The Thomson Reuters Trust Principles.

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