EMERGING MARKETS-Brazil’s real marks longest losing streak in 7-1/2 years

PUBLISHED: Thu, 08 Jul 2021 19:18:53 GMT

* Latam FX fall, but come off day’s lows as dollar weakens * Peru, Colombia among most vulnerable EMs from delta variant -JPM * Peru, Chile to rise 9.5% and 8%, respectively – ECLAC * Latam stocks fall between 0.1% – 1.4% (Updates prices) By Ambar Warrick and Susan Mathew July 8 (Reuters) – Latin American currencies joined a broader rout in emerging markets on Thursday, as a rapid rise in the COVID-19 Delta variant and dovish signals from China raised concerns over an economic recovery this year. A slide in the dollar, however, saw most regional currencies cut some losses. Brazil’s real fell 0.2% after having lost as much as 1.5% during the session. The real extended losses into an eighth straight session – its longest losing streak since January 2014 – as the broader risk-off mood exacerbated worries over corruption scandals threatening political stability in the country. Data on Thursday showed Brazilian inflation in June hit a near five-year high. “But the data are not quite enough to prompt a shift from 75 basis points hikes to a larger 100bps move,” said William Jackson, chief EM economist at Capital Economics. The central had flagged the possibility of a 100 bps move at its last meeting. The real is now trading down 1% for the year, after rising as much as 5.8%. Economies of the Philippines, Peru, Colombia, South Africa and Thailand are among the most vulnerable to the COVID-19 Delta variant within emerging markets, mostly due to low vaccination rates, a JPMorgan analysis found on Thursday. Meanwhile, the Economic Commission for Latin America and the Caribbean (ECLAC) said Panama, Peru and Chile should score the best performances in the year in Latam, with expansions of 12%, 9.5% and 8%, respectively. Brazil should grow by 4.5%, while Mexico was set to advance 5.8% and Argentina, 6.3%. Mexico’s peso was down 0.1%, after briefly touching a two-week low. Data showed inflation was almost unchanged in June, but well above the central bank’s target range. Minutes of the Mexican central bank’s last meeting, where it unexpectedly hiked rates, also showed the bank viewed a recent spike in prices as transitory, and highlighted its newest board member, Galia Borja’s, dovish thinking. Peru’s sol turned session losses around to rise 0.3% ahead of a central bank rate decision later in the day. Investors broadly expect the bank to hold rates at 0.25%. Regional shares joined a global stocks rout, with a fall in Chinese technology stocks spilling over to broader markets and trigger risk-off selling. The S&P Dow Jones Indices and FTSE Russell on late Wednesday decided to remove more Chinese companies from their indices after an updated U.S. executive order barred domestic investment in firms with alleged ties to China’s military. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1316.11 -1.83 MSCI LatAm 2498.94 -1.15 Brazil Bovespa 125256.41 -1.39 Mexico IPC 49570.82 -0.96 Chile IPSA 4185.50 -0.5 Colombia COLCAP 1284.77 -0.13 Currencies Latest Daily % change Brazil real 5.2544 -0.31 Mexico peso 19.9827 -0.30 Chile peso 752 -0.55 Colombia peso 3837 -0.23 Peru sol 3.951 -0.04 (Reporting by Ambar Warrick Editing by Alistair Bell and Sandra Maler)

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