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EMERGING MARKETS-Latam FX slides on coronavirus risks, U.S.-China tensions

Credit: REUTERS/RODRIGO GARRIDO

Most currencies in Latin America weakened on Tuesday, as a rise in COVID-19 cases globally and a flare-up in U.S.-China tensions kept investors away from riskier bets, even as data showed signs of economic improvement in Brazil.

By Shreyashi Sanyal

July 14 (Reuters) - Most currencies in Latin America weakened on Tuesday, as a rise in COVID-19 cases globally and a flare-up in U.S.-China tensions kept investors away from riskier bets, even as data showed signs of economic improvement in Brazil.

Risk appetite was sparse in global equity markets after a reintroduction of coronavirus restrictions in the U.S. state of California also took the shine off encouraging earnings reports from big banks on Wall Street. .N

COVID-19 cases continued to spike in South America and elsewhere globally. A Reuters count on Monday showed the number of deaths from the coronavirus in Latin America had exceeded the figure for North America, for the first time since the start of the pandemic.

Simmering geopolitical tensions between the United States and China also hit sentiment after the United States rejected China's claims to offshore resources in most of the South China Sea.

The MSCI's index for Latin American currencies .MILA00000CUS shed 1.2% while its stocks counterpart .MILA00000PUS slipped 1.5%, putting both indexes on track for their worst one-day percentage fall in nearly three weeks.

Brazil's real BRBY tumbled 0.7% against a firmer dollar, even as data showed economic activity in Latin America's largest economy began to grow again in monthly terms in May, after two sharp consecutive declines in March and April, as businesses slowly began to reopen.

Most currencies in the regions have regained some lost ground from a steep sell-off, but higher dollar demand and loosening monetary policy have pressured Latin American currencies. But commodity-linked currencies have outperformed in recent weeks tracking some improvement in raw material prices.

The Chilean peso CLP= tracked a decline in copper prices on Tuesday, while oil-exporter Colombia's peso COP= mirrored a slide in crude prices.

Investors also awaited a policy statement from the Chilean central bank on Wednesday, which will likely show the benchmark interest rate being held at 0.5% in July.

Mexico's peso MXN=, however, rose 0.4% against the dollar. Analysts have said that recent economic data from the country has suggested that the worst is likely over but cautioned that economic activity remains limited as the virus is still spreading rapidly in the country.

"The government is sticking to its austerity course and is offering only little financial aid to the economy," analysts at Commerzbank wrote in a client note.

"Against this background, the economic recovery is likely to be very slow."

Key Latin American stock indexes and currencies;

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1055.46

-1.48

MSCI LatAm .MILA00000PUS

1927.21

-1.54

Brazil Bovespa .BVSP

98552.04

-0.15

Mexico IPC .MXX

35982.93

-1.12

Chile IPSA .SPIPSA

4104.49

-0.26

Argentina MerVal .MERV

43160.94

-0.176

Colombia COLCAP .COLCAP

1139.98

-0.45

Currencies

Latest

Daily % change

Brazil real BRBY

5.4223

-0.65

Mexico peso MXN=D2

22.6130

0.66

Chile peso CLP=CL

787

0.24

Colombia peso COP=

3641.22

-0.81

Peru sol PEN=PE

3.4998

-0.09

Argentina peso (interbank) ARS=RASL

71.2900

-0.07

Argentina peso (parallel) ARSB=

123

3.25

(Reporting by Shreyashi Sanyal in Bengaluru)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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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