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Most Latam FX fall as U.S.-China trade worries rise

* China’s Hong Kong security law compounds trade worries * Dollar strengthens as safe-haven demand rises * Argentina extends debt talks deadline as default looms (Adds comments, updates prices) By Shreyashi Sanyal May 22 (Reuters) – Most Latin American currencies weakened on Friday as demand for the safe-haven dollar rose after China’s plan to impose a new national security law on Hong Kong became the latest front in intensifying tensions between Beijing and Washington. The U.S. dollar rose for a second day, while Brazil’s real slipped 0.2%. Declining oil prices pressured crude exporter Colombia’s peso, while Chile’s currency dipped as prices of its main export, copper, slid. “As ‘trade conflict’ also means ‘USD strength’, the risk-on related USD weakness seen over the past days comes to a (preliminary) end,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank. Regional stocks were also lower, with Brazil shares retreating from near three-week highs. Latin American assets have now been hit with a double whammy, with most South American economies reeling under pressure from coronavirus-fueled shutdowns and more recently, a resurgence in U.S.-China trade tensions. “Our working assumption is that lockdowns will eventually be lifted as the virus comes under control. Even so, the fact that they will remain in place for longer in most emerging markets will make the region’s (Latin America) recovery slower,” economists at Capital Economics wrote in a note. Brazil suffered a record of 1,188 daily coronavirus deaths on Thursday and is fast approaching Russia to become the world’s No. 2 COVID-19 hot spot behind the United States, as it struggles to tackle the health and economic crisis in the face of rising political worries. Mexico’s main index rose 0.6% with eyes on developments regarding the new rules in the energy sector. Meanwhile, data showed inflation in the country accelerated faster that expected in the first half of May, but the annual rate still remained below the central bank’s target rate. Citigroup analysts say the rates market will likely look beyond Mexico’s inflation number given that food price increases are likely seen as transitory by the central bank. In Argentina, the government is planning to amend its offer to creditors to restructure $65 billion in foreign debt, with talks on a positive course, Economy Minister Martin Guzman told Reuters. On Thursday, the government extended a deadline for talks with creditors to restructure around $65 billion in foreign debt to June 2, as the two sides edge closer to a deal needed to avert a messy default that would drag the country deeper into crisis. Key Latin American stock indexes and currencies at 1956 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 904.53 -2.74 MSCI LatAm 1669.44 -0.4 Brazil Bovespa 82031.58 -1.2 Mexico IPC 35779.27 0.61 Chile IPSA 3733.83 -0.57 Argentina MerVal 40771.22 -1.491 Colombia COLCAP 1061.78 -0.41 Currencies Latest Daily % change Brazil real 5.5726 -0.15 Mexico peso 22.7629 0.45 Chile peso 805.5 -0.35 Colombia peso 3774.64 -0.39 Peru sol 3.429 -0.53 Argentina peso (interbank) 68.1700 -0.12 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Andrea Ricci)


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