March 7, 2019 / 9:46 PM / 3 months ago

EMERGING MARKETS-Latam currencies plunge as Argentina peso sets record low

 (Recasts with currency lows; updates prices, adds market
strategist's quote)
    * Dollar jumps to strongest levels since mid-2017
    * Argentina's peso hits record low 
    * Mexico inflation slowed for 2nd straight month in Feb 

    By Agamoni Ghosh
    March 7 (Reuters) - Latin American currencies hit their
lowest levels so far this year on Thursday as the dollar jumped
to its strongest levels since June 2017 after the European
Central Bank pushed out interest rate hikes until 2020, while
stocks in the region were mixed. 
    MSCI's index tracking currencies in Latin
America fell 1.9 percent, with Argentina's peso hitting a
record low.
    Investors piled into the dollar, shying away from equities
as well as the euro after the ECB changed tack on its tightening
plan, delaying its first post-crisis rate hike until 2020 at the
earliest and offering banks a new round of cheap loans to help
revive the euro-zone economy.
    ECB President Mario Draghi said downside risks included
geopolitical factors, the threat of protectionism and
vulnerabilities in emerging markets.  
    "The move is certainly driven by Draghi's testimony today.
It's all about the dollar today," said Christian Lawrence,
senior market strategist, Latam, at Rabobank. "It will be
difficult to make huge gains in EM, but don't think it is the
start of a broad based sell-off in the space," he added.   
    The ECB's move comes after several central banks across the
world held rates following the U.S. Federal Reserve's signal in
late January that it would be patient in tightening monetary
    The dollar's strength hit Argentina's peso the most, erasing
all the gains it made so far this year.
    Argentina's economy is shrinking amid one of the highest
inflation rates in the world, posing an arduous challenge for
President Mauricio Macri, who hopes to get re-elected in
    The Mexican peso fell over 1 percent against the
dollar, after data showed the country's annual inflation rate
slowed for a second straight month to its lowest rate in more
than two years in February. 
    Brazil's real and Chile's peso also fell,
between 0.7 percent and 1.1 percent. 
    MSCI's index for Latin American stocks fell
over 1.5 percent, led by Mexico, but a 2.5 percent rise
in Argentina's stocks limited losses.  
    Sao Paulo-traded stocks rose for the first time in
five sessions, led by banking and material stocks. Iron-ore
miner Vale led gains on the index. 
    Colombia's peso weakened 1.2 percent, while local
stocks lost 0.2 percent. 
    Key Latin American stock indexes and currencies at 2129 GMT
 Stock indexes                        daily %
                             Latest    change
 MSCI Emerging Markets       1043.56    -1.15
 MSCI LatAm                  2712.58    -1.56
 Brazil Bovespa             94375.45     0.17
 Mexico IPC                 41633.78    -0.65
 Chile IPSA                  5256.82     0.01
 Argentina MerVal           33189.91     2.63
 Colombia IGBC              12440.65    -0.21
 Currencies                           daily %
 Brazil real                 0.25836    -0.78
 Mexico peso                 19.5611    -1.03
 Chile peso                   667.45    -1.18
 Colombia peso               3137.85    -1.26
 Peru sol                      3.312    -0.15
 Argentina peso                42.37    -4.46

 (Reporting by Agamoni Ghosh; Editing by Leslie Adler)
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