June 25, 2020 / 8:20 PM / 19 days ago

EMERGING MARKETS-Mexican peso up, cenbank cuts rates; Brazil's real struggles

    * Mexican cbank cuts rates by 50 bps to 5%
    * More cuts in the offing - analyst
    * Brazil's real swings in volatile trade; last down 0.2%
    * Brazil's new sanitization bill could lure investors

 (Updates after Mexican central banks decision)
    By Susan Mathew
    June 25 (Reuters) - Mexico's peso rose half a percent on
Thursday after the central bank cut the country's key interest
rate by 50 basis points, as widely expected, to help the economy
as it faces a deep recession due to the coronavirus pandemic.
    The peso shed some gains right after the decision but
then scaled session highs. The bank slashed rates to 5% in a
unanimous decision by its five board members, citing risks to
growth and stable inflation in the short term.
    "The outlook component of the statement remains relatively
unchanged, which gives us confidence in maintaining our current
policy rate forecast of two further 50bp cuts, followed by two
25bp cuts, that will bring the policy rate to 3.50% by end of
year," said Sacha Tihanyi, deputy head of emerging market
strategy at TD Securities. 
    Chile's peso tracked copper, its largest export item,
higher, while Colombia's currency was flat against a
stronger dollar.
    Brazil's real last traded 0.2% lower in high
volatility. The central bank chief said Brazil's GDP outlook is
brighter than the newly reduced forecast of a 6.4% contraction
this year, adding that the bank has not abandoned its inflation
goals. The estimate compares to the International Monetary
Fund's 9.1% contraction for the country expected this
year.
    Meanwhile, Brazil approved a new sanitation bill in a move
that is expected to prompt states and municipalities to
privatize water and sewage companies, luring investors.

    Sao Paulo listed stocks rose 1.6% with industrial
stocks among the biggest gainers. 
    MSCI's index for Latin American stocks  was
flat with other regional benchmarks trading mixed. 
    The index has fallen about 32% this year with the region
emerging as the latest coronavirus epicenter. Researchers said
the death toll from COVID-19 in Latam is expected to rocket to
388,300 by October, with Brazil and Mexico seen accounting for
two-thirds of fatalities. 
    The IMF warned on Thursday that stocks and other risky
assets could suffer a second swoon if the coronavirus spreads
more widely, lockdowns are reimposed or trade tensions surge
again.
    In Argentina, Economy Minister Martin Guzman said the
country is working with its creditors to reach a debt
restructuring deal after talks stalled, though there is still
distance to cover in economic and legal terms.    
    
    Key Latin American stock indexes and currencies at 1939 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1005.02    -0.57
                                   
 MSCI LatAm               1928.68     0.06
                                   
 Brazil Bovespa          95857.37     1.57
                                   
 Mexico IPC              37766.39    -0.37
                                   
 Chile IPSA               4045.59     0.23
                                   
 Argentina MerVal        41546.19    2.747
                                   
 Colombia COLCAP          1123.48    -0.18
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.3310    -0.15
                                   
 Mexico peso              22.6710     0.47
                                   
 Chile peso                 811.6     0.84
                                   
 Colombia peso            3730.37    -0.09
                                   
 Peru sol                  3.5028     0.14
                                   
 Argentina peso           70.1500    -0.07
 (interbank)                       
                                   
 
 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Dan
Grebler and Marguerita Choy)
  
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