July 29, 2020 / 2:42 PM / 7 days ago

EMERGING MARKETS-Latam FX treads higher as dollar weakens ahead of Fed move

    By Shreyashi Sanyal
    July 29 (Reuters) - Most Latin American currencies edged
higher on Wednesday against the dollar which fell to a two-year
low on growing expectations of a dovish policy stance from the
U.S. Federal Reserve. 
    The Brazilian real firmed 0.4%, while more
commodity-linked currencies of Chile and Colombia
edged higher. The MSCI's index for Latin American currencies
 rose 0.5%. 
    The Fed, after a policy meeting, is expected to provide
reassurance of endless stimulus for the U.S. economy in a
statement at 1800 GMT (2 p.m. EDT). No major policy changes are
expected.     
    Stocks in Latin America also rose with the Brazil Bovespa
index leading gains. Telefonica Brasil SA
rose after the company reported a 21.6% drop in second-quarter
net income, but exceeded market expectations as lower financial
expenses and cost-control efforts slightly compensated for
smaller revenues amid the coronavirus pandemic.
    Mexico's peso was rangebound on Wednesday. Mexican airline
Aeromexico, which is in a Chapter 11 restructuring process, said
on Tuesday it posted a $1.2 billion net loss for the second
quarter and laid off about 2,000 workers as the coronavirus
pandemic roils the airline industry.
    Data showed Brazil's economy lost 1.2 million formal jobs in
the first half of the year, but the losses almost evaporated in
June, suggesting the labor market was over the worst of the
coronavirus crisis.     
    Bank lending spreads in Brazil shrank to their lowest in
over six years and default ratios hit a 2020 low in June,
figures showed, a sign that the central bank's emergency
measures to boost the availability of credit are paying off.
 
    "Year-to-date, Brazil remains one of the worst performing
countries in the MSCI EM index, but it is true that the
Brazilian markets have improved and economic data has started to
trend upward," said Crit Thomas, global market strategist at
Touchstone Investments.
    "I think a lot of it has to do with the global monetary and
fiscal stimulus that's putting a lot of money in motion and
looking for upside."
    Argentina is nearing an initial agreement with China that
could pave for the way for potential investments by the Asian
giant in local pork production for export, Argentina's
undersecretary of trade and investment promotion told Reuters.

    Argentine over-the-counter bonds fell on Tuesday
amid concerns about an impasse between the government and its
international creditors who are racing to restructure around $65
billion in debt that has become unsustainable.
    Key Latin American stock indexes and currencies:
      Stock indexes                  Latest         Daily %
                                                     change
 MSCI Emerging Markets                   1086.18          0.38
                                                  
 MSCI LatAm                              2122.91          0.86
                                                  
 Brazil Bovespa                        105271.08          1.12
 Mexico IPC                             37465.84         -0.81
 Chile IPSA                              4010.59         -1.11
                                                  
 Argentina MerVal                       49527.37         1.212
                                                  
 Colombia COLCAP                         1170.13         -0.07
                                                  
                                                              
         Currencies                  Latest         Daily %
                                                     change
 Brazil real                              5.1453          0.21
                                                  
 Mexico peso                             22.0128         -0.40
                                                  
 Chile peso                                758.6          0.79
                                                  
 Colombia peso                           3710.83          0.32
 Peru sol                                 3.5098         -0.05
                                                  
 Argentina peso (interbank)              72.1900         -0.07
                                                  
 Argentina peso (parallel)                   131          3.82
                                                  
 
 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by
Bernadette Baum)
  
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