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Dollar strength pressures Latam FX; IMF trims growth outlook

July 23 (Reuters) – A strong U.S. dollar and sliding oil prices dragged on Latin American currencies on Tuesday, while stocks were mixed amid expectations central banks around the world would cut interest rates soon. An index of Latin American currencies dropped 0.6%, with Brazil’s real falling nearly 0.8%, partly pressured by a slide in oil prices. Brazil’s consumer price index rose 0.09% in the month to mid-July, but missed market expectations, reaffirming concerns about the sluggish growth rate of Latin America’s largest economy. Economists at Bank of America Merril Lynch lowered their outlook for Brazilian interest rates, predicting that the central bank will undertake an aggressive policy-easing cycle starting next week’s monetary policy meeting. Adding to the dour mood, the IMF slashed its economic growth expectation for Latin America by more than half compared with estimates from just three months ago, citing its downgrades to growth in both Brazil and Mexico. Mexico’s peso was down 0.4%, with President Andres Manuel Lopez Obrador criticizing the IMF’s downgrade and reiterating that the economy will expand 2% in 2019. The Chilean and Colombian peso fell between 0.3% and 0.5%. Argentina’s peso shed 0.8%. The IMF in its report expected a slightly deeper-than-expected recession in Argentina in 2019 and a slower recovery in 2020. Earlier this month, ratings agency Moody’s had changed its economy’s outlook to negative from stable for Argentina, citing rising uncertainty about economic policy and risk of additional “damaging currency shocks.” Stock indices were mixed in the region, with Brazil’s Bovespa falling marginally as losses in material stocks weighed on the index, but stocks in Argentina rose 0.9%. Key Latin American stock indexes and currencies at 14:45 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1054.20 0.04 MSCI LatAm 2891.44 -0.73 Brazil Bovespa 103707.69 -0.23 Mexico IPC 41122.94 -0.21 Chile IPSA 5031.76 0.11 Argentina MerVal 39093.00 0.94 Colombia IGBC 12922.09 -0.19 Currencies daily % Latest change Brazil real 3.7657 -0.75 Mexico peso 19.1378 -0.45 Chile peso 691.7 -0.45 Colombia peso 3183.53 -0.24 Peru sol 3.291 -0.18 Argentina peso 42.6450 -0.43 (interbank) (Reporting by Agamoni Ghosh in Bengaluru; Additional reporting by Rodrigo Campos; Editing by Bernadette Baum)


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