June 14, 2018 / 11:53 PM / a year ago

UPDATE 1-EMERGING MARKETS-Brazil's real drops to weakest since May 2017 on ECB

 (Recasts lede with Brazilian real's drop, adds analyst's
    By Bruno Federowski and Claudia Violante
    BRASILIA, June 14 (Reuters) - The Brazilian real 
fell to its weakest since May 2017 on Thursday after the
European Central Bank announced it will end its bond purchasing
scheme by year-end, removing a key source of liquidity from
global markets.
    The announcement, which makes the ECB the latest central
bank in developed economies to take steps to move away from
stimulus measures introduced to recover from the global
financial crisis, weighed on demand for emerging market assets.

    The real fell 2.64 percent to 3.8119 versus the U.S. dollar,
its weakest since May 18 of last year.
    "The euro plummeted and strengthened the dollar worldwide.
Outside the emerging currencies have gotten worse; we had to
keep up," a currency trader at a local brokerage said.
    Earlier in the session the real had firmed, supported by the
central bank's reinforced intervention.
    The bank has increased sales of traditional currency swaps,
which function like future dollar sales, after concerns over a
widening fiscal deficit and accelerating inflation in the United
States as well as Brazilian presidential elections later this
year drove a currency selloff.
    Brazil's central bank said on Thursday it will continue to
offer currency swaps to the market and sees no restriction for
the amount of those swaps to "considerably exceed" volumes seen
in the past.
    Mexico's peso was also hit after the ECB's
announcement, slipping to its weakest level since January 2017. 
    It fell 1.18 percent to 20.8835 per dollar.
    Key Latin American stock indexes and currencies at 23:25
 Stock indexes                           daily %    YTD %
                                Latest   change     change
 MSCI Emerging Markets          1125.71      -0.88      -2.83
 MSCI LatAm                     2479.32      -0.53     -12.33
 Brazil Bovespa                71421.19      -0.97      -6.52
 Mexico IPC                    47197.24       0.93      -4.37
 Chile IPSA                     5524.69      -0.17      -0.72
 Chile IGPA                    27920.80      -0.08      -0.21
 Argentina MerVal              30114.88      -0.38       0.16
 Colombia IGBC                 12281.85      -0.16       8.01
 Venezuela IBC                 49413.62      11.65    3811.97
 (Reporting by Bruno Federowski and Claudia Violente
Writing by Anthony Esposito
Editing by G Crosse and Cynthia Osterman)
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