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Brazil's real rebounds day after Trump slaps tariffs
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Peru's interest rate decision awaited
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Brazil's annual inflation ticks up in June
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MSCI Latam stocks down 1.3%, dip for fourth straight day
(Updates with afternoon trading levels)
By Ragini Mathur, Purvi Agarwal and Shashwat Chauhan
July 10 (Reuters) - Most Latin American currencies were
muted on Thursday, while Brazil's real recouped some of last
sessions' steep losses as markets assessed the impact of U.S.
President Donald Trump's latest tariff salvo.
Late on Wednesday, Trump targeted Brazil, Latin America's
biggest economy, with threats of 50% tariffs on exports to the
U.S., while simultaneously issuing tariff notices to seven
smaller trading partners.
President Luiz Inacio Lula da Silva said he wanted to find a
diplomatic solution to Trump's tariff order, but vowed to
reciprocate like-for-like if they take effect on August 1.
One month implied volatility on the currency
shot up to its highest since late April, with the real up
0.7% on Thursday after falling almost 2.4% in the last session.
"While a tariff announcement was arguably expected to
some extent, we think the high levy announced on Brazil goods -
currently one of the highest tariff rates announced by the US so
far - caught markets by surprise," UBS strategists led by Roque
Montero noted.
"Persistent FX weakness is a risk to watch since it
could weigh on domestic financial conditions and investment
flows."
The Brazilian real has been among the best performing
currencies in emerging markets so far this year, as high
interest rates make it a valuable carry trade currency.
Fresh data showed Brazil's monthly inflation slowed for the
fourth time in a row in June, but the annual rate ticked up and
remained well above the official goal.
Mexico's peso held steady at 18.6 per dollar
after minutes from its central bank's last policy meeting showed
most of the governing board supports smaller cuts, signaling a
more cautious approach.
Chile came under the spotlight recently after Trump slapped
50% tariffs on copper imports to the U.S. earlier this week, and
set a hard deadline of August 1. The local peso eased
0.1%.
Peru's sol inched 0.1% up in low volumes ahead of a
local monetary policy decision.
Stocks in Latin America were mixed, though MSCI's index for
regional equities fell 1.3%, set for a fourth
straight day of declines.
Heavyweight Brazilian stocks down 0.5%, with
planemaker Embraer ( ERJ ) down 3.7% as analysts warned that
the world's third-largest aircraft manufacturer, which has a
huge market in the U.S. for its executive planes and regional
jetliners, would be one of the firms most affected by the
tariffs.
Stocks in Mexico were flat, while those in Chile
and Colombia were slightly higher.
Argentina's Merval index slumped 2.9% as investors
returned from a market holiday.
HIGHLIGHTS
**
Brazil has few exit routes from Trump tariff but feels less
pain
** Egypt's central bank keeps key interest rates unchanged
** Copper output from Chile's Codelco climbs 17% in May
Key Latin American stock indexes and currencies:
MSCI Emerging Markets 1231.13 0.27
MSCI LatAm 2294.49 -1.28
Brazil Bovespa 136842.37 -0.46
Mexico IPC 56705.3 0.03
Argentina Merval 2068736.04 -2.866
Chile IPSA 8344.09 0.18
Colombia COLCAP 1683.16 0.48
Brazil real 5.5371 0.69
Mexico peso 18.61 0.1
Chile peso 950.05 -0.07
Colombia peso 4010.5 0.17
Peru sol 3.545 0.11
Argentina peso 1255 0.00
(interbank)
Argentina peso (parallel) 1275 0.39