EMERGING MARKETS-Brazil’s real at near 3-month low on policy, economic uncertainty

By Susan Mathew and Ambar Warrick

Aug 20 (Reuters)Brazil’s real fell on Thursday, with broader Latin American currencies following suit after a warning from the U.S. Federal Reserve and weak economic data underscored a move out of risk assets.

The real BRBY, BRL= sank 0.6%, recouping a measure of the day’s losses but still trading around three-month lows, while losses in Brazilian stocks .BVSP were mitigated by heavyweight iron ore miner Vale VALE3.SA.

Brazil’s Economy Minister Paulo Guedes called a Senate decision on Wednesday to overturn a presidential veto blocking public sector pay rises during the COVID-19 pandemic a “disaster” and a “crime” against the people.

If the Chamber (of Deputies) approves the Senate’s decision, “this could jeopardize the savings of 130 billion reais, which the economy ministry had expected,” said analysts at CM Capital Markets.

Amid investor worries that Brazil may exceed its pending cap, President Jair Bolsonaro said emergency payments to the country’s poor could be extended through the end of the year. Guedes said Brazil’s economy is recovering in the shape of a Nike “swoosh”.

Data also showed that federal tax revenue in Latin America’s largest economy fell to its lowest since 2009 due to continued pressure from the coronavirus pandemic.

Investors fled to safe havens such as the dollar and gold after the Fed said more policy easing may be needed to help the economy out of a pandemic-induced slump. Data on Thursday showed new claims for unemployment benefits rose above 1 million in the latest week. MKTS/GLOBFRX/

Oil, iron ore and metal prices fell, pressuring assets in commodity-heavy Latam. O/RMET/LIRONORE/

The Mexican peso MXN= was flat and Chile’s currency CLP= slid about 0.5%, while Colombia’s currency COP= lost 0.8%.

Their stock markets were muted, in line with lackluster moves on Wall Street.

Surging number of COVID-19 cases in Latam also weighed but some optimism came from Brazil’s health ministry which said the spread of the virus in the country could be about to slow.

Elsewhere in the emerging markets, Turkey’s lira TRY= lost 0.3% against the dollar after the central bank held its key rate steady as expected despite the lira hitting record lows this week.

The bank will continue back-door liquidity measures, it said, and raised forex and lira required reserve ratios for commercial banks.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1080.79

-1.69

MSCI LatAm .MILA00000PUS

1962.94

-1.07

Brazil Bovespa .BVSP

100699.98

-0.15

Mexico IPC .MXX

38712.74

-0.79

Chile IPSA .SPIPSA

3974.53

-0.61

Argentina MerVal .MERV

47539.25

0.143

Colombia COLCAP .COLCAP

1171.39

0.83

Currencies

Latest

Daily % change

Brazil real BRBY

5.5651

-0.64

Mexico peso MXN=D2

22.1315

-0.04

Chile peso CLP=CL

787.7

-0.48

Colombia peso COP=

3789

-0.89

Peru sol PEN=PE

3.5768

-0.42

Argentina peso (interbank) ARS=RASL

73.5200

-0.05

(Reporting by Susan Mathew in Bengaluru; Additional reporting by Maria Carolina Marcello and Gabriel Ponte in Brasilia Editing by Paul Simao and Alistair Bell)

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