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EMERGING MARKETS-Latam FX firm as dollar drops; U.S. tariffs pressure stocks

Credit: REUTERS/PILAR OLIVARES

A dollar weakened by poor U.S. economic data helped Latin American currencies brush off the re-imposition of U.S. tariffs on steel and aluminum imports from Brazil and Argentina on Monday.

By Susan Mathew

Dec 2 (Reuters) - A dollar weakened by poor U.S. economic data helped Latin American currencies brush off the re-imposition of U.S. tariffs on steel and aluminum imports from Brazil and Argentina on Monday.

Brazil's real firmed 0.4% with a spot auction by the central bank supporting the currency, while the Argentine ARS= and Mexican pesos MXN= were flat against a dollar that slid on weak U.S. manufacturing data. FRX

Surprising officials in the two South American countries, U.S. President Donald Trump said on Monday he would restore tariffs on U.S. steel and aluminum imports, accusing them of devaluing their currencies to the detriment of U.S. farmers.MKTS/GLOB

Brazil's benchmark Bovespa .BVSP index rose as mine Vale VALE3.SA advanced on higher iron ore prices, and as retailer Via Varejo VVAR3.SA posted strong Black Friday sales, but other Latam equity markets slipped.

Argentine stocks .MERV fell almost 3%, snapping three days of gains, and led losses in the region. Aluminum producer Alua Aluminio Argentino ALUA.BA was the worst performer on the index, down more than 10%.

"The main thing is that trade tensions aren't going away," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.

"Markets had been pretty complacent about a U.S.-China trade deal and the U.S.-Mexico-Canada trade deal. There was a lessening in tensions, and this goes against that."

But since no official announcement has been made, markets will await more clarity and justification, he said.

The real BRL= eased 0.4% immediately after the tweet, but reversed course after the central bank sold 9,600 reverse currency swap contracts and $480 million in spot currency. FRX/

Data showing Brazil's manufacturing growth in November also supported sentiment as it pointed to a steady recovery in Latin America's largest economy.

Similar data in Mexico, however, showed November manufacturing activity slowed to its most sluggish pace in over 8-1/2 years on the back of economic uncertainty, declining business confidence and weak demand.

The Chilean peso CLP= firmed as the central bank's $20 billion currency intervention program kicked in. The bank had outlined the plan last week after the peso hit a record low against the dollar.

The peso was also supported by higher prices for copper, Chile's largest export, as markets perceived increased demand for the metal following the stronger-than-expected Chinese data. MET/L

Key Latin American stock indexes and currencies at 19:30 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1039.88

-0.02

MSCI LatAm .MILA00000PUS

2667.01

0.38

Brazil Bovespa .BVSP

109056.54

0.76

Mexico IPC .MXX

42679.10

-0.33

Chile IPSA .SPIPSA

4499.70

-0.86

Argentina MerVal .MERV

33526.09

-2.824

Colombia Colcap .COLCAP

1597.75

-0.88

Currencies

Latest

Daily % change

Brazil real BRBY

4.2197

0.45

Mexico peso MXN=D2

19.5750

-0.07

Chile peso CLP=CL

803.2

0.07

Colombia peso COP=

3503

0.36

Peru sol PEN=PE

3.391

0.41

Argentina peso (interbank) ARS=RASL

59.9600

-0.03

(Reporting by Ambar Warrick and Susan Mathew in Bengaluru; Editing by Richard Chang)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130))

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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