March 3, 2020 / 7:55 PM / 3 months ago

EMERGING MARKETS-Latam FX bounces after dollar falls on U.S. Fed's rate cut

    * Goldman Sachs slashes Brazil, Mexico 2020 GDP forecasts
    * Argentina confirms first coronavirus case  
    * Brazil's BRF sees 2020 "volatility," shares fall

 (Adds comments, updates prices throughout)
    By Shreyashi Sanyal
    March 3 (Reuters) - Most Latin American currencies rose on
Tuesday, as the U.S. dollar sank after the Federal Reserve cut
interest rates in an emergency move to help the world's largest
economy fight the blow from a fast-spreading coronavirus.
    The U.S. central bank said it was cutting rates by half a
percentage point to a target range of 1.00% to 1.25%, sending
the dollar to a six-week low, before it pared losses.
    "What the Fed did today was certainly positive for emerging
market assets because it takes away a very strong support that
the dollar had, which is yields," said Sacha Tihanyi, deputy
head of emerging markets strategy at TD Securities. "This also
sort of signals that there is an aggressive monetary easing
stance on the Fed's mind."
    Most emerging market currencies have been under pressure
recently from fears of the global economic impact of the
coronavirus outbreak, which drove investors away from riskier
assets and into the perceived safety of gold, the U.S. dollar
and Treasuries.
    MSCI's index for Latin American currencies
rose 0.2%, but Brazil's real lagged its peers and touched
all-time lows.
    The Chilean and Colombian pesos gained, and
the Peruvian sol also firmed.
    Economists at Goldman Sachs slashed their 2020 economic
growth forecasts for Brazil and Mexico, citing the expected
impact from the coronavirus.
    "Central banks (in Latin America) could use the Fed's
decision as an excuse to lower interest rates further, despite
rising inflation, and we might see Banxico also respond with
more cuts," said Jason Tuvey, senior emerging markets economist
at Capital Economics.
    Mexico's peso traded in a tight range against the
dollar. The currency has fallen more than 2% in 2020 so far. 
    Argentina's peso eased as Health Minister Gines
Gonzalez Garcia confirmed the South American country's first
case of coronavirus.
    Regional stocks fell, with Sao Paulo stocks leading
    BRF SA slid 6.5% after the food processor said
2020 will likely be "a volatile" year given uncertainty related
to grain prices, forex variations and epidemics like the new
    Chile stocks rose 0.1%, but gains were capped by a
14% tumble in shares of SQM, the world's No. 2 lithium
    The company reported a slump in profits in the last quarter
of 2019 and warned that early 2020 sales in China could be hit
by the coronavirus.
    Key Latin American stock indexes and currencies at 1929 GMT:
     Stock indexes             Latest      Daily %
 MSCI Emerging Markets          1026.13          0.89
 MSCI LatAm                     2461.53         -0.76
 Brazil Bovespa               104962.28         -1.56
 Mexico IPC                    42608.80          1.05
 Chile IPSA                     4288.76          0.12
 Argentina MerVal              36060.59        -0.531
 Colombia COLCAP                1529.42         -0.46
        Currencies             Latest      Daily %
 Brazil real                     4.5105         -0.55
 Mexico peso                    19.3856          0.07
 Chile peso                       807.1          0.68
 Colombia peso                  3461.22         -0.04
 Peru sol                         3.422          0.56
 Argentina peso (interbank)     62.3075         -0.08

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Editing by Alistair Bell and Leslie Adler)
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