EMERGING MARKETS-Latam FX slammed by strong dollar, Brazil's real hits new low

    * Brazil posts lowest monthly February inflation since 1994
    * Coronavirus buoys safe-have demand for U.S. dollar
    * Chilean peso hits two-month low as copper prices weaken
    * Argentine bonds fall after IMF nod for restructuring

    By Shreyashi Sanyal
    Feb 20 (Reuters) - Latin American currencies took a beating
on Thursday, as investors fretted over the global spread of the
coronavirus after cases outside of China rose, with Brazil's
real hitting a new low amid rising safe-haven buying of the U.S.
    The number of new infections rose in South Korea, while
Japan reported two new deaths and new research suggested the
pathogen was more contagious than previously thought, adding to
the alarm.
    "There is still uncertainty about how long this (outbreak)
is going to last and how big the economic effect is going to be,
not just on China, but on supply chains around the world," said
Scott Brown, chief economist at Raymond James.
    The dollar was perched at a 10-month high against the
Japanese yen after rising nearly 2% since Tuesday, while also
upping pressure on Latin American currencies.
    Brazil's real weakened 0.4% to 4.3917 against the
greenback, touching a fresh record low. Data showed Brazilian
inflation slowed in February to its lowest in over a quarter of
a century.
    "The headline rate is likely to edge down further over the
course of the year, allowing the central bank to keep the Selic
(key interest) rate at its historic low," William Jackson, chief
emerging markets economist at Capital Economics, wrote in a
    The central bank of Latin America's biggest economy said it
would lower banks' reserve requirements on time deposits to 25%
from 31%, starting on March 16, in a move that will free up an
estimated 49 billion reais ($11.2 billion) of liquidity.

    A basket of currencies in the region
weakened by 0.4%, while MSCI's index for Latin American equities
 fell 0.5%. 
    The Chilean peso fell nearly 1% against the dollar,
touching levels not seen since early December as prices of
copper, the country's biggest export, slipped on rising worries
of demand. 
    Argentine bond prices fell 1.5% after the International
Monetary Fund essentially gave the government a green light to
restructure its bonds.
    "The IMF's assessment shouldn't come as a surprise,"
analysts at Credit Suisse wrote in a note.    
    "Argentina also needs to extend its upcoming amortizations
with the IMF as much as possible in order to alleviate the
enormous pressure on international reserves from executing such
    Other major currencies in Latin America, including Mexico
 and Colombia, also eased. 
    Key Latin American stock indexes and currencies at 1446 GMT:
     Stock indexes              Latest    Daily % change
 MSCI Emerging Markets           1097.27           -0.58
 MSCI LatAm                      2762.31           -0.51
 Brazil Bovespa                115998.43           -0.45
 Mexico IPC                         0.00               0
 Chile IPSA                      4524.50            0.12
 Argentina MerVal               38489.94           0.258
 Colombia COLCAP                 1680.69            0.26
        Currencies              Latest    Daily % change
 Brazil real                      4.3815           -0.38
 Mexico peso                     18.7376           -0.96
 Chile peso                        803.7           -0.61
 Colombia peso                      3400           -0.51
 Peru sol                         3.3888           -0.23
 Argentina peso (interbank)      61.7850           -0.09

 (Reporting by Shreyashi Sanyal and Medha Singh in Bengaluru;
editing by Nick Macfie)

Source: Read Full Article