EMERGING MARKETS-Brazil’s real eyes worst week in over nine months

PUBLISHED: Fri, 26 Mar 2021 18:58:00 GMT

* Real slides for fifth straight session * Oil jump boosts Mexico * Colombian peso logs longest losing streak of the year * Colombia central bank holds rates as expected (Updates after Colombian central bank decision) By Sruthi Shankar and Susan Mathew March 26 (Reuters) – Brazil’s real was on its longest losing run this year on Friday, hit by worries about a coronavirus pandemic that is spiraling out of control, while the Colombian peso hit a four-month low. The real weakened for a fifth straight day, down 1.4%, in what could be the longest losing streak since late October. The currency was set to end with a weekly loss of about 4.5%, the steepest weekly loss since last June. Brazil registered a record 100,158 new coronavirus cases on Thursday, a day after it surpassed 300,000 fatalities from the pandemic, the world’s worst death toll after the United States. “Vaccines are rolling out gradually and the government does not have the fiscal ammunition it did last year, and if it were to pursue similar policies it would be flirting even closer with a fiscal crisis scenario,” Ramiro Sugranes, senior analyst for Latam research at FrontierView, told the Reuters Global Markets Forum. Meanwhile, a near 4% jump in crude prices after a massive traffic jam caused by the blockage by a giant container ship of the Suez Canal – a major global trade route – lifted oil exporter Mexico’s currency. Colombia’s peso erased session gains, extending losses to a fifth straight session, its longest this year. The currency closed at session lows, down 0.6%. Shortly after, the central bank held the key interest rate at 1.75% as expected, aimed at boosting economic recovery amid inflation at record lows. “Inflation breakevens show a very benign outlook over the longer term,” said Lewis Jones, portfolio manager, emerging markets debt at William Blair Investment Management. “An expansionary monetary policy is further warranted by the government’s fiscal proposals … in the hopes of avoiding the country’s sovereign credit rating being cut to sub-investment grade.” Colombia’s policy decision comes after central banks in Mexico, South Africa and the Philippines this week held interest rates steady as they balanced the need for spurring economic growth with keeping a lid on inflation. That stood in contrast to the hawkish stance adopted by emerging market peers such as Turkey, Brazil and Russia. Still, an index of EM currencies was on course for its biggest weekly decline since September as investors snapped up the greenback on hopes of a stimulus-driven U.S. economic recovery. Latin American stocks were supported by rising commodity prices on Friday, but were also headed for weekly declines. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1299.63 0.87 MSCI LatAm 2230.72 -0.9 Brazil Bovespa 113666.16 -0.07 Mexico IPC 46651.49 -0.77 Chile IPSA 4845.75 1.64 Argentina MerVal 46298.34 -1.191 Colombia COLCAP 1312.81 -0.55 Currencies Latest Daily % change Brazil real 5.7487 -1.39 Mexico peso 20.5878 0.42 Chile peso 731.9 -0.94 Colombia peso 3687.14 -0.59 Peru sol 3.732 0.05 Argentina peso 91.8400 -0.07 (interbank) (Additional reporting by Lisa Pauline Mattackal in Bengaluru and Tom Arnold in London; Editing by Kirsten Donovan and Leslie Adler)

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