April 6, 2018 / 3:58 PM / 3 months ago

LatAm currencies down as global trade tensions escalate

BRASILIA (Reuters) - Latin American currencies weakened on Friday after China fought back against a new U.S. threat to increase tariffs on Chinese goods.

A man is reflected on the glass as he observes a board showing the Real-U.S. dollar and several foreign currencies exchange rates in Rio de Janeiro, Brazil, May 9, 2016. REUTERS/Ricardo Moraes/File Photo

China warned it was fully prepared to respond with a “fierce counter strike” of fresh trade measures if the United States follows through on President Donald Trump’s threat to slap tariffs on an additional $100 billion in Chinese goods.

The warning came after Trump upped the ante on Thursday by ordering U.S. officials to identify extra tariffs, escalating a high-stakes confrontation with potentially damaging consequences for the world’s two biggest economies.

“It’s still a battle of words at this time but that is enough to pull down prices,” Guide Investimentos analysts wrote in a client note.

The currencies of Brazil BRBY, Mexico MXN=D2, Chile CLP=CL and Colombia COP= weakened between 0.1 and 0.9 percent in early trading, despite data showing the U.S. economy in March created the fewest jobs in six months.

A weak labor market could drive the Federal Reserve to hike interest rates at a slower pace than expected in coming months, potentially boosting the allure of emerging market assets.

Stock markets were also down across the region due to global risk aversion, with MSCI’s Latin American index .MILA00000PUS down 1.75 percent, its biggest daily loss in two months.

Brazil's benchmark stock index .BVSP led the declines, falling 1.1 percent.

Shares of drug retailer RD (RADL3.SA) were among the biggest decliners after Credit Suisse cut its recommendation for the stock to “underperform” from “outperform” in the wake of hefty losses.

Reporting by Bruno Federowski; Editing by James Dalgleish

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