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Chile markets hammered by weekend protests, other Latam FX weaken

(Updates market prices) By Susan Mathew Oct 21 (Reuters) – Latin American currencies slipped against a steady dollar on Monday, while Chile markets tumbled after a state of emergency was declared in the capital city of Santiago following violent protests over the weekend. Chile’s peso shed as much as 2.4% to 727.33 per dollar and was on course to log its biggest one-day drop in more than 6 years, while stocks sank almost 5% in what could be their worst day in about two years. The military was put in charge of security in Santiago after youth protests against fare hikes on public transport implemented earlier this month turned to vandalism and arson. President Sebastian Pinera later extended emergency rule to cities to the north and south of the capital. Chile’s finance minister Felipe Larrain said on Monday that the civil unrest will “undoubtedly” have an impact on the economy. “The events were entirely unexpected and should lead to a weaker CLP in the near term,” analysts at Citigroup wrote in a note. “We don’t expect the weakness to sustain unless the situation deteriorates much further.” While Citi Economics differs from market expectations of a cut in interest rates by Chile’s central bank on Wednesday, the risk of one has certainly increased after the unrest, they said. Workers at BHP’s Escondida copper mine in Chile – the world’s largest – said they would hold a day-long strike on Tuesday in a show of solidarity. Copper prices shot up on the London Metals exchange. Brazil’s real slipped 0.4% with the final Senate vote on the government’s pension reform bill expected to take place on Tuesday. The reform is seen as crucial to reducing Brazil’s primary deficit and spurring a recovery in the sluggish economy. If the bill wins Tuesday’s vote, that will clear the way to passing the bill into law. The real has seen volatility for months as the bill made its way through houses of parliament after President Jair Bolsonaro’s administration introduced it upon taking office in January. Lower oil prices pressured crude exporter Colombia’s currency, while Mexico’s peso fell 0.1% but hovered near 2-1/2 month highs as broader market sentiment was buoyed by trade optimism. Over the weekend, Chinese Vice Premier Liu He said Beijing will work with Washington to address each other’s concerns on trade issues. Most stocks in the region inched higher, tracking a rise on Wall Street. While banks and steel companies dragged Sao Paulo-listed shares higher, education company Yduqs, up 3.6%, was among the top gainers on the index on news it bought Adtalem Global Education Inc’s local assets for 1.92 billion reais ($467 million). Key Latin American stock indexes and currencies at 1931 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1028.75 0.46 MSCI LatAm 2712.81 0.06 Brazil Bovespa 105766.53 0.99 Mexico IPC 43363.51 0.43 Chile IPSA 4953.20 -4.61 Argentina MerVal 32367.51 1.248 Colombia IGBC 12854.59 0.17 Currencies Latest Daily % change Brazil real 4.1340 -0.37 Mexico peso 19.1239 -0.12 Chile peso 725.6 -2.29 Colombia peso 3447 -0.65 Peru sol 3.3368 -0.02 Argentina peso (interbank) 58.4900 -0.24 (Reporting by Susan Mathew in Bengaluru; Editing by Chizu Nomiyama and Sonya Hepinstall)

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