EMERGING MARKETS-Chile, Peru lead Latam FX losses; c.bank forex swap buoys Brazil’ real

By Susan Mathew and Shreyashi Sanyal

May 24 (Reuters) – The currencies of Chile and Peru led declines in Latin America on Monday on concerns over curbs on industrial metals in top consumer China, while Brazil’s real recovered from over two-week lows as the central bank intervened.

Chile’s peso CLP= fell 1.2%, while Peru’s sol PEN= dropped 1.5%. A rise in the price of copper was capped after China’s market regulators warned industrial metal companies to maintain “normal market order” during talks on the significant gains in metals prices this year.

Tensions in Chile regarding the possible overhaul of its market-friendly constitution and a likely socialist leadership in Peru also have weighed on copper prices. MET/L

“The (Chilean) government’s poor showing in an election to decide the relative weight of participation by Chilean political parties in a re-write of the country’s constitution introduces further Chilean asset risk,” said Sacha Tihanyi, head of emerging markets strategy at TD Securities.

Brazil’s real BRBY rose 0.6% after the central bank said it will start a program of foreign exchange swap auctions on Monday that will eventually roll over the $12.2 billion worth of traditional swaps contracts due to expire on Aug. 2. FRX/

The political atmosphere in the country grew tenser after former leftist and centrist presidents met to try to join forces and oppose current far-right leader Jair Bolsonaro in elections next year.

“With regard to the BRL, it is particularly important to watch whether President Bolsonaro flirts with further spending packages in an attempt to avoid a drop in his poll prospects, and whether fears increase again that the spending cap will be undermined,” Commerzbank currency analyst Alexandra Bechtel said.

Data on Monday showed annual headline inflation in Mexico stood at 5.80% in the year through the first half of May, well above the central bank’s target of 3%, strengthening the case to end an easing cycle. The peso MXN= rose 0.4%.

In equities, Aeromexico’s shares AEROMEX.MX fell 0.2% after sources said the U.S. government is preparing to downgrade Mexico’s aviation safety rating, a move that would bar Mexican carriers from adding new U.S. flights and limit airlines’ ability to carry out marketing agreements.

Meanwhile on Friday, a closely followed JPMorgan survey showed investors this month made their biggest cut to “hard currency” emerging market sovereign bond positions in five years.

Key Latin American stock indexes and currencies at 1927 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1327.95

-0.16

MSCI LatAm .MILA00000PUS

2479.07

0.43

Brazil Bovespa .BVSP

123963.41

1.12

Mexico IPC .MXX

49407.19

-0.75

Chile IPSA .SPIPSA

4108.24

0.68

Argentina MerVal .MERV

56221.87

-1.554

Colombia COLCAP .COLCAP

1226.20

-1.44

Currencies

Latest

Daily % change

Brazil real BRBY

5.3218

0.61

Mexico peso MXN=D2

19.8550

0.39

Chile peso CLP=CL

730

-1.45

Colombia peso COP=

3732.25

0.33

Peru sol PEN=PE

3.8098

-1.52

Argentina peso (interbank) ARS=RASL

94.2700

-0.02

Argentina peso (parallel) ARSB=

150

3.33

(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Barbara Lewis and Andrea Ricci)

(([email protected]; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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