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Latam currencies slide as China worries dent risk appetite

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Brazil’s real and Mexico’s peso fell

against the dollar on Monday, tracking other emerging market

currencies as worries about China’s economic growth dented risk

appetite, while Hungary’s forint was set for its worst session

since May against the euro.

The forint’s 1.7% slide was triggered by rating

agency S&P lowering Hungary’s credit rating outlook to negative

from stable.

S&P said that external risks, including potential cuts to

European Union funds and reduced gas flows, could weigh on

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Hungary’s growth prospects, already pressured by surging

inflation and a fiscal adjustment to rein in the budget deficit.

The forint has slumped more than 7% so far this year, far

underperforming other central and eastern European currencies. A

broader basket of emerging market currencies is

down about 4%.

Global sentiment took a hit on Monday after weak retail

sales and factory activity in China raised worries about slowing

growth in the world’s second largest economy, prompting its

central bank to cut a key lending rate to stimulate demand.

This sent the safe-haven dollar rallying.

“The first impression from the latest set of activity data

for July is that there are few signs of a strong rebound in the

(Chinese) economy,” said Charlie Lay, FX and EM analyst at

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Commerzbank.

“Consumer sentiment is likely to remain fragile given

uncertainties over future outbreaks and lockdowns. Furthermore,

the economy is still battling with the property correction and

weak investment in general.”

China is a major destination for commodity exports from

resource-rich Latin America.

Brazil’s real lost 0.6%, after three weeks of gains.

Investors seemed to look past data showing economic activity

rose more than expected in June, helped by a service sector

rebound following the impact of the COVID-19 pandemic.

Brazil stocks were down 1% as iron ore miner Vale

dropped 3%.

The miner was fined about 86.3 million reais ($16.82

million) after the country’s comptroller general decided the

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firm did not present truthful information on the conditions of

its Brumadinho tailings dam prior to a 2019 disaster.

Mexico’s peso lost 0.1%, breaking a five-session

winning streak.

Most other Latin American markets were closed for local

holidays.

Key Latin American stock indexes and currencies at 1406 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1013.51 -0.33

MSCI LatAm 2241.98 -0.76

Brazil Bovespa 111628.75 -1.01

Mexico IPC 48688.38 -0.34

Currencies Latest Daily %

change

Brazil real 5.1035 -0.60

Mexico peso 19.8870 -0.29

Peru sol 3.849 0.00

(Reporting by Susan Mathew in Bengaluru; Editing by Kirsten

Donovan)

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