March 21, 2019 / 3:43 PM / 7 months ago

EMERGING MARKETS-Brazil assets slump on Temer arrest, Latam FX falls

    By Agamoni Ghosh
    March 21 (Reuters) - Latin American currencies fell on
Thursday as the U.S. dollar recovered a day after the U.S.
Federal Reserve abandoned projections for any interest rate
hikes this year, while Brazil assets slumped after the surprise
arrest of former President Michel Temer. 
    MSCI's index for Latin American currencies fell 0.5 percent
despite most emerging market assets reacting positively to the
accommodative stance in monetary policy from the Fed as the
dollar came off two-week lows.  
    Brazil's real as well as stock markets led
falls across the region after Temer, who left office three
months ago, was arrested as part of a sweeping anti-corruption
investigation known as "Car Wash."
    Temer was president from 2016 to 2018, taking office
following the impeachment of Dilma Rousseff, for whom he served
as vice president for six years.
    "The ex-president's arrest seems to be affecting the
immediate moves but overall the Fed policy has been good for
emerging market currencies," said William Jackson, chief
emerging market economist at Capital Economics in London.
    Aiding the real's fall was the central bank's decision on
Wednesday to maintain its benchmark interest rate at a record
low 6.50 percent, while noting that recent economic data had
been weaker than expected.
    The Bovespa was further dragged lower by financial
stocks as the military austerity plan presented to Congress
disappointed and is estimated to generate much lower net savings
per year than earlier thought. 
    The bill is the final piece of a pension reform overhaul
proposed by President Jair Bolsonaro, a former army captain,
aimed at saving over 1 trillion reais in a decade.
    Mexico's peso came off five-month lows as the dollar
recovered and after ratings agency Fitch reduced its 2019
forecast for Mexico's economic growth to 1.6 percent from 2.1
percent on Wednesday. Stocks on the IPC index were
marginally higher. 
    Colombia's peso firmed 0.2 percent, while local
stocks tacked a shade lower.
    
    Key Latin American stock indexes and currencies at GMT
    
 Stock indexes                        daily %
                             Latest    change
 MSCI Emerging Markets       1068.49    -0.08
                                      
 MSCI LatAm                  2822.19    -1.64
                                      
 Brazil Bovespa             96052.18    -2.03
                                      
 Mexico IPC                 43326.19     0.39
                                      
 Chile IPSA                  5252.85     0.15
                                      
 Argentina MerVal           34619.30    -0.36
                                      
 Colombia IGBC              13324.72    -0.02
                                      
                                             
 Currencies                           daily %
                                       change
                              Latest  
 Brazil real                  3.8186    -1.40
                                      
 Mexico peso                 18.8447    -0.09
                                      
 Chile peso                    666.1    -0.62
                                      
 Colombia peso               3075.75     0.35
 Peru sol                      3.294    -0.06
                                      
 Argentina peso              40.7700     0.29
 (interbank)                          
                                      
 

 (Reporting by Agamoni Ghosh in Bengaluru; Editing by Bernadette
Baum)
  
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