Latam joins broader EM sell-off as growth, political worries sap risk appetite

By Susan Mathew

July 5 (Reuters) - Emerging market currencies were battered on Tuesday as the dollar reigned supreme, and a gauge of eastern European stocks slumped to an all-time low after a surge in European gas prices heightened global recession worries.

MSCI's index of emerging market currencies .MIEM00000CUS hit 20-month lows with resource-rich Latin America's currencies joining the sell-off.

Crude exporter Colombia's peso COP= hit an all-time low of 4,253.60, while top copper producer Chile's peso CLP= slumped to new lows of 946.20-a-dollar hit by falling prices of oil and the red metal respectively.

Mexico's peso MXN= and Brazil's real BRBY slumped 1.3% with the latter hitting five-month lows as May industrial output rose less than expected.

European gas prices surged after flows from Russia dipped and strikes at Norwegian oil and gas infrastructure added to concerns over supply, exacerbating fears over spiralling inflation and slowing economic growth.

"Slowdown fears are now arguably the main driver of currencies globally, perhaps even more so than central bank interest rate expectations," said Matthew Ryan, head of market strategy at global financial services firm Ebury.

Central and eastern European currencies tumbled against the dollar which surged as the euro tanked, while MSCI's index of eastern European stocks .MIME00000PUS dropped 4.8% - their worst session since early March.

The broader emerging market stocks index .MSCIEF extended losses to a fifth straight session.

After having hit 50 per dollar last week, Russia's rouble RUBUTSTN=MCX tumbled to around 61 per dollar, while Turkey's lira TRY= weakened more than 1%.


Argentina's official peso ARS=RASL gave up another 0.2% after a turbulent Monday when investors fretted over policy implications after Silvina Batakis, widely viewed as close to the hard left-wing of the ruling Peronist coalition, was appointed as the new economy minister.

The country's popular black market peso had dropped about 8% on Monday.

Argentina is a top global exporter of soybeans, corn and wheat, and farm sector leaders in the country said they were worried about Batakis' close ties with Vice President Cristina Fernandez de Kirchner who pushed higher export taxes on agricultural goods when she was president from 2007-2015.

Latam bankers expect a drop in M&A and equity deals to intensify through the end of the year as Brazil goes through its presidential elections in October with leftist former President Luiz Inacio Lula da Silva ahead in polls.

Stocks in Latam also fell on Tuesday, with Mexico's IPC index .MXX sliding over 2%, while Argentina's Merval index .MERV recovered 2% after Monday's slip.

Key Latin American stock indexes and currencies at 1414 GMT: Stock indexes


Daily %

change MSCI Emerging Markets


-0.45 .MSCIEF



-3.24 .MILA00000PUS

Brazil Bovespa


-1.64 .BVSP

Mexico IPC


-2.12 .MXX

Chile IPSA


-0.84 .SPIPSA

Argentina MerVal


2.059 .MERV

Colombia COLCAP


-1.7 .COLCAP



Daily %

change Brazil real


-1.26 BRBY

Mexico peso


-1.34 MXN=D2

Chile peso


-1.91 CLP=CL

Colombia peso COP=


-1.30 Peru sol


-0.78 PEN=PE

Argentina peso


-0.18 (interbank) ARS=RASL

Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.