EMERGING MARKETS-Brazil's real slides as public sector debt soars; Colombian peso firms

Australian dollars in Sydney, Friday, Jan. 15, 2016. (AAP Image/Joel Carrett) NO ARCHIVING
    * Brazil's public sector debt hits 86.5% of GDP
    * Colombian peso extends four-day winning streak
    * Chile's stock index slides as manufacturing activity falls
    * LatAm FX index logs biggest monthly decline since March

 (Updates prices throughout, adds comments)
    By Sagarika Jaisinghani and Shreyashi Sanyal
    Aug 31 (Reuters) - The Brazilian real slipped on Monday as
data showed the country's finances deteriorated further due to
the COVID-19 pandemic, while Colombia's peso held steady after
an expected cut in interest rates.
    The real was down 1.2% against a weaker dollar
as the health crisis pushed Brazil's public sector debt to a
record 86.5% of gross domestic product in July, while its
primary deficit, which excludes interest payments, was 81.1
billion reais ($15 billion).
    Analysts at Rabobank said even as COVID-19 infections and
fatalities rose, the rolling averages of new cases have been
losing steam, and they expect the real to gain some lost ground
by the end of the year.
    "Despite volatility, we still see the USD-BRL trading at
5.25 by year end and at 4.90 by end-2021."
    The currency has plunged 26.6% to record lows in 2020 as the
pandemic hammered growth in Latin America's biggest economy. On
Friday, Brazil's Treasury raised the public debt ceiling for
2020 to account for the surge in emergency spending to combat
the health crisis.    
    An index of Latin American currencies fell
0.3% and clocked its biggest monthly percentage decline since
March, when the onset of the pandemic triggered a flight from
risky assets.
    The index has severely underperformed its global counterpart
, which rose for a fifth straight month amid
aggressive global stimulus and hopes of a post-pandemic economic
    The Colombian peso gained 0.3% versus the greenback,
rising for a fourth straight session after the central bank cut
rates by 25 basis points. Analysts said the rate cut is likely
to be the last in an easing cycle meant to boost the economy
amid the coronavirus.     
    In Argentina, the peso eased as investors awaited the
results of the government's debt deal later in the day, with
expectations running high that the tender received huge creditor
support. A strong deal is key for the major grains
producer to drag itself out of default and revive an economy in
its third year of recession.
    The Chilean peso firmed about 0.5%, but the stock
index tumbled 1.8% to its lowest level in nearly three
months as data showed manufacturing activity fell 7.2% in July,
driven by a decline in food production.
    A 2.2% slide in Mexico's stock index also weighed on
a basket of Latin American equities, putting it
on course for its first monthly decline in five. Mexico's peso
 shed 0.5%.
    Key Latin American stock indexes and currencies at 1936 GMT:
          Stock indexes                  Latest   Daily %
 MSCI Emerging Markets                   1102.81    -1.68
 MSCI LatAm                              1949.30    -2.41
 Brazil Bovespa                        100389.04    -1.72
 Mexico IPC                             36979.92    -2.15
 Chile IPSA                              3775.54    -2.54
 Argentina MerVal                       46849.36    0.976
 Colombia COLCAP                         1210.84    -1.25
             Currencies                  Latest   Daily %
 Brazil real                              5.4799    -1.23
 Mexico peso                             21.8653    -0.52
 Chile peso                                776.5     0.24
 Colombia peso                           3732.23     0.32
 Peru sol                                 3.5418    -0.26
 Argentina peso (interbank)              74.1700    -0.23
 Argentina peso (parallel)                   132     3.03

 (Reporting by Sagarika Jaisinghani and Shreyashi Sanyal in
Bengaluru; Editing by David Gregorio and Leslie Adler)

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