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EMERGING MARKETS-Brazil's real surges; Peru, Chile pesos drop more than 1%

Ambar Warrick and Susan Mathew
·3 min read
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* Peruvian sol extends losses to a fifth straight session * Chile's peso slips 1.3%, stocks drop 2% * Brazil's real rallies in catch up trade * Moody's warns Brazil's extra COVID-19 spend is credit negative (Recasts, updates prices) By Ambar Warrick and Susan Mathew April 22 (Reuters) - Brazil's real rose on Thursday, catching up with its regional neighbors after a holiday, while Peru's sol posted its worst day in more than one year as a new poll showed leftist presidential candidate Pedro Castillo keeping his lead. Chile's peso lost 1.3%, coming off three-month highs as it tracked a dip in copper prices. Mining unions in Chile have threatened to protest if the government does not drop a bid to block pensions withdrawal, having already approved two withdrawals. Chile's central bank said this week that a third withdrawal risked generating "a significant increase in the Chilean economy's risk profile." The Chilean stocks benchmark fell 2% and logged its worst session in two months. The real jumped 1.5% to a one-month high after a holiday on Wednesday. Most other Latin American currencies had firmed then, owing to a weaker dollar in the light of falling U.S. Treasury yields. The Brazilian government's decision to exclude extra pandemic-fighting expenditure this year from the spending cap framework is a negative development for the country's sovereign credit profile, ratings agency Moody's warned on Thursday. A damaging new wave of COVID-19 infections, especially in Brazil, has held back gains in emerging market currencies. "Severe COVID-19 outbreaks across Latin America will put a brake on the region's economic recovery in Q2," wrote the Latam economics team at Capital Economics in a note. "We still think that Latin America will emerge from this crisis in worse shape than other EM regions. Central banks will keep monetary policy looser than is currently priced into financial markets." Peru's sol plummeted 1.2% to near record lows, extending losses into a fifth straight session after Castillo was seen having a 15 percentage point advantage over his right-wing rival Keiko Fujimori. Castillo, seeking to calm markets, said he would not nationalize companies and would respect the country's legal rules. Mexico's peso fell 0.2%, as inflation rose faster than expected in the first half of April to the highest level in more than three years, far surpassing the central bank's target range. Still, the peso is likely to be supported by steady interest rates, which the central bank is expected to keep at 4% longer than previous estimates. Among stocks, Brazil's Bovespa extended losses to a third session, while Colombia's COLCAP marked its fifth straight day in the red. Mexico's IPC index, meanwhile, rose for the third straight session to scale 2-1/2 year highs. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1341.88 0.38 MSCI LatAm 2409.96 0.57 Brazil Bovespa 119698.06 -0.3 Mexico IPC 49087.34 0.45 Chile IPSA 4830.37 -2.06 Argentina MerVal 47235.99 -0.799 Colombia COLCAP 1297.58 -0.58 Currencies Latest Daily % change Brazil real 5.4665 1.48 Mexico peso 19.9383 -0.33 Chile peso 706.4 -1.20 Colombia peso 3633.35 -0.57 Peru sol 3.7547 -1.23 Argentina peso 93.0700 -0.03 (interbank) (Reporting by Ambar Warrick in Bengaluru Editing by Bernadette Baum and Richard Chang)