Latam currencies knocked by firmer dollar, bleak China data



* China services sector activity hit hard by coronavirus

* Chilean peso, Peruvian sol down as copper prices fall

* U.S. sanctions Russian banks, Putin's daughters

* Fed likely to adopt phased-in $95 bln monthly balance sheet runoff

By Shreyashi Sanyal and Anisha Sircar

April 6 (Reuters) - Latin American currencies fell on Wednesday against a firming dollar on bets of more aggressive U.S. Federal Reserve policy, while weak data from China spurred fears of slowing economic growth.

Brazil's real BRBY BRL= fell 1.3%, while the broader MSCI Latin American currencies gauge .MILA00000CUS slipped 1.1%.

A survey showed activity in China's services sector contracted at the sharpest pace in two years in March as one of Latin America's biggest trading partners struggles to contain a surge in coronavirus cases.

Currencies of the two biggest copper producing countries, Chile CLP= and Peru PEN= , fell after prices of the metal slipped amid fears of slowing demand from China.

Following hawkish comments from a top Fed official on Tuesday, investors looked to clues from the minutes of the U.S. central bank's most recent March policy meeting, which showed that balance sheet reduction could begin next month.

The release of the minutes took the U.S. dollar index to its highest since late May, ramping up pressure against emerging market currencies.

Further, the U.S. announced a new round of sanctions targeting Russian banks and Kremlin officials and banning Americans from investing in Russia.

Russia's MOEX index .IMOEX fell 2%, while the rouble RUBUTSTN=MCX rallied 4% in thin trade to 79.70 against the dollar, a six-week high.

"While financial conditions remain abysmal, the rouble is almost back to pre-crisis levels due to a combination of factors: a commodity-price and import-contraction driven large current account surplus, severe capital controls, and tight monetary policy," economists at the Institute of International Finance wrote in a note.

The rouble's strengthening is unsurprising, given Russian authorities' moves to prop up the currency, and is likely to reverse if sanctions are tightened in the weeks to come, they added.

Latin American markets have outperformed the broader developing world in the wake of the Ukraine crisis supported by monetary tightening cycles and a rally in commodity prices, but analysts are now questioning the flip side of the phenomenon.

"Latin America has few direct economic and financial linkages with Russia and Ukraine," said Gersan Zurita, a senior vice president at Moody's Investors Service.

"However, the acceleration in energy prices and new round of supply shocks is constraining access to key food and industrial commodities, resulting in higher inflation and the likelihood of continued monetary policy tightening."

The MSCI's index for Latin American stocks .MIEM00000PUS fell 1.7% as broader risk appetite eased, with Brazil's Bovespa .BVSP down 1%.

Key Latin American stock indexes and currencies at 1923 GMT:

Stock indexes

Latest

Daily % change MSCI Emerging Markets

1141.67

-1.3 .MSCIEF

MSCI LatAm

2648.22

-1.51 .MILA00000PUS

Brazil Bovespa

118094.77

-0.66 .BVSP

Mexico IPC

55481.86

-0.12 .MXX

Chile IPSA

4948.15

0.39 .SPIPSA

Argentina MerVal

90916.38

-0.978 .MERV

Colombia COLCAP

1627.21

-0.41 .COLCAP

Currencies

Latest

Daily % change Brazil real

4.7086

-1.08 BRBY

Mexico peso

20.1310

-0.69 MXN=D2

Chile peso

799.4

-1.56 CLP=CL

Colombia peso COP=

3746.82

-0.29

Peru sol

3.696

0.00 PEN=PE

Argentina peso

111.8300

-0.11 (interbank) ARS=RASL

Argentina peso

193

1.55 (parallel) ARSB=


Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru Editing by Marguerita Choy and Nick Macfie


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