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EMERGING MARKETS-Latam markets hammered by dollar, sliding commodities

·3 min read

By Susan Mathew June 18 (Reuters) - Mexico's peso slumped 1.6% on Friday to 13-week lows, leading heavy losses across Latin American peers as a rallying dollar and falling commodity prices weighed. The peso extended losses to a sixth straight session - its longest such streak since February - to hit 20.748 to the dollar. It is set to post its worst week in nine months. The dollar rally got a new lease of life after Federal Reserve official James Bullard said inflation was stronger than anticipated and said he was among the seven officials who saw rate increases beginning next year to contain inflation. That, combined with investors positioning for Mexico's central bank meeting next week was pressuring the peso, said Wilson Ferrarezi, an economist at TS Lombard. Some analysts speculate Mexico could raise interest rates, having cut it to 4% as recently as February. But Ferrarezi said the central bank "has been, in relative terms, less hawkish than for instance Brazil's Banco Central. They seem to see the inflationary pressures in Mexico as largely transitory." Brazil's central bank this week sent a strongly hawkish message, pushing the real to one-year highs. On Friday the currency fell 0.3%, but was still the only EM currency among major peers across the board set to mark gains this week. Declining oil prices also weighed on the Mexican peso as well as on fellow crude exporter Colombia's currency which lost 0.8%. The currencies of top copper exporters Chile and Peru slumped, after prices of the red metal fell 0.9% on the London's Metals Exchange.{MET/L} The Chilean peso hit its lowest this year against the dollar at 749.50. In Peru, presidential election uncertainty added to the sol's woes. The sol dropped 0.6%, ringing year-to-date losses to 8.1%. Peru's electoral board said it is working at top speed to declare the final result after votes were cast on June 6. Socialist Pedro Castillo holds a slim lead and the country's urban elite, fearing more left-wing policies, are reported to be taking their money abroad. All main stock indexes in Latam slipped, falling between 0.1% and 1.7%, with Mexico's Ipc index hitting three week lows, tracking similar falls on Wall Street indexes. The one bright spot was Brazilian power utility Eletrobras , shares in which surged as much as 10% after a bill on its long-pending privatisation was approved by the Senate overnight. Eletrobras was the top boost on Sao Paulo's Bovespa index, capping its losses at 0.1%. Average yields on Latin American local currency bonds have risen 13 basis points in June as of Thursday's close compared to a 5 bps rise across all emerging markets, according to data from JPMorgan's GBI-EM index. Key Latin American stock indexes and currencies at 1535 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1360.00 -0.21 MSCI LatAm 2594.48 -0.76 Brazil Bovespa 127928.98 -0.1 Mexico IPC 49865.64 -0.67 Chile IPSA 4313.55 -0.39 Argentina MerVal 65310.33 -1.701 Colombia COLCAP 1244.23 -0.37 Currencies Latest Daily % change Brazil real 5.0376 -0.26 Mexico peso 20.6927 -1.35 Chile peso 748 -1.36 Colombia peso 3754.14 -0.75 Peru sol 3.9388 -0.58 Argentina peso 95.3800 -0.01 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Sujata Rao and Alistair Bell)

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