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Argentine peso rises on capital controls; trade woes impede Latam stocks

Credit: REUTERS/Agustin Marcarian

Argentina's peso gained for a second day on Tuesday following capital controls amid a deepening financial crisis, while ongoing U.S.-China trade tensions dented Latin American stocks.

By Agamoni Ghosh

Sept 3 (Reuters) - Argentina's peso gained for a second day on Tuesday following capital controls amid a deepening financial crisis, while ongoing U.S.-China trade tensions dented Latin American stocks.

The peso ARS= opened sharply stronger, up 6% officially against the dollar, marking Wall Street's first reaction to Argentina's new currency controls after a long holiday weekend in the United States.

A divergence between the official and black market rates of the currency still remained for a second day, casting doubts on how long the recovery in the peso could be sustained through such controls.

"The black market rate is lower then the official suggesting that there is still some pressures there," said Edward Glossop, Latam economist at Capital Economics.

"History suggests that capital controls do sometimes help to alleviate pressure on currencies in the near term, but over the longer term when people start finding loopholes in the system. That's when it makes it more difficult."

The controls come after markets reacted sharply to rating downgrades by Standard and Poor, Fitch and Moody's, after the government announced its plans to "re-profile" some $100 billion in debt.

MSCI's index of Latin American stocks .MILA00000PUS was 0.2% lower, in-line with global equities as investors fret about Washington and China's struggle to schedule a meeting this month to renew trade talks. MKTS/GLOB

The Merval stock index in Buenos Aires .MERV shed 3.7%after having closed 6% higher in the previous session.

Stocks in Chile .SPISPA declined 0.7%, while the peso CLP= fell to its lowest since January 2016 ahead of a decision by the central bank's on monetary policy.

"We think that the central bank will lower the monetary policy rate by 50bps, to 2.00%, in today's monetary policy," said analysts from Credit Suisse in a note.

Key Latin American stock indexes and currencies at 1430 GMT

Stock indexes

Latest

daily % change

MSCI Emerging Markets .MSCIEF

974.38

-0.95

MSCI LatAm .MILA00000PUS

2555.53

-0.5

Brazil Bovespa .BVSP

100146.86

-0.48

Mexico IPC .MXX

41979.19

-0.31

Chile IPSA .SPIPSA

4739.13

-0.69

Argentina MerVal .MERV

24963.67

-4.702

Colombia IGBC .IGBC

12534.16

-0.81

Currencies

Latest

daily % change

Brazil real BRBY

4.1599

0.52

Mexico peso MXN=D2

20.0375

0.51

Chile peso CLP=CL

726.2

-0.19

Colombia peso COP=

3439.73

0.06

Peru sol PEN=PE

3.404

0.03

Argentina peso (interbank) ARS=RASL

55.8000

5.73

(Reporting by Agamoni Ghosh amd Medha Singh in Bengaluru)

((Agamoni.Ghosh@thomsonreuters.com; +918067491130; Reuters Messaging: Agamoni.Ghosh.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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