EMERGING MARKETS-Latam FX drops as Wall St rout spurs dollar demand

    * Mexican shares lead losses
    * Mexican peso, Colombian peso hurt by oil slide
    * MSCI Latam shares index drops over 2%

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    Sept 8 (Reuters) - Emerging market currencies fell on
Tuesday as a sharp fall on Wall Street sent panicked investors
into the U.S. dollar, with simmering Sino-U.S. tensions and
concerns over an economic recovery adding to the mix. 
    Amid concerns that a recovery in oil demand could weaken as
coronavirus infections flare up around the world, crude prices
tanked, further pressuring petro-currencies such as the Mexican
 and Colombian pesos, which fell about 0.7% each.

    In a move that could threaten its investment rating, Mexico 
late on Monday raised a nonbinding limit for gross debt to 70%
of GDP, almost 20 percentage points above last year's level, for
the remaining four years of the term of its fiscally
conservative president.
    Meanwhile, the Mexican government's 2021 spending blueprint
will likely forecast revenue similar to this year's level, or
6.1 trillion pesos ($282 billion), a senior lawmaker said on
    Mexican stocks led losses among their peers for the
day, while other Latin American indexes tracked a technology-led
rout on Wall Street.
    The MSCI's index of Latam stocks dropped
more than 2%.  
    The dollar hit a three-week high as losses in Wall Street
brewed risk aversion.
    Worries about a tough economic rebound from the coronavirus
pandemic and simmering U.S.-China tensions after President
Donald Trump again raised the idea of decoupling the U.S. and
Chinese economies also sent investors to the safety of the
   "Risk appetite remains weak as U.S.-China geopolitical
tensions flared up again overnight. With the U.S. election only
weeks away, we expect more of this to come," said Ned Rumpeltin,
European head of FX strategy at TD Securities. 
    "Correlations between risky assets and the dollar have
started to rise sharply again. In line with this, we are seeing
a further bout of dollar strength against most G10 and major EM
    The Argentine peso slipped to new lows, but
global ratings agency S&P upgraded Argentina's long-term
sovereign credit rating on Monday, pulling it out of default
territory after the government successfully restructured over
$100 billion in sovereign debt.
    Coming back from a long weekend, Brazil's real fell
1%, while Chile's peso rose slightly.
    Elsewhere, South Africa's rand fell as much as 1.5%
after the recession-hit economy's second quarter GDP fell more
than expected - contracting by a record 51%, as a strict
coronavirus-induced lockdown stalled economic activity.
    Key Latin American stock indexes and currencies:
    Stock indexes             Latest       Daily % change
 MSCI Emerging Markets         1087.78                 -0.62
 MSCI LatAm                    1964.35                 -2.39
 Brazil Bovespa               99694.53                 -1.53
 Mexico IPC                   36061.92                 -1.57
 Chile IPSA                    3814.84                 -1.02
 Argentina MerVal             45418.69                -0.596
 Colombia COLCAP               1232.41                 -0.85
       Currencies             Latest       Daily % change
 Brazil real                    5.3575                 -0.96
 Mexico peso                   21.7600                 -0.65
 Chile peso                      772.3                  0.28
 Colombia peso                 3737.45                 -0.73
 Peru sol                       3.5408                 -0.14
 Argentina peso                74.7000                 -0.07
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell and Jonathan Oatis)

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