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Latam currencies slide as dollar attempts gains, Americanas sinks

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Latin American currencies joined

their emerging market peers in the red on Monday as the dollar

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edged up from seven-month lows, while Brazilian retailer

Americanas plummeted on the possibility of an $8 billion debt

charge.

Brazil’s real tripped 0.8% against the dollar,

while Mexico’s peso lost 0.2%, both looking to break

four-session winning streaks.

Both Latin American currencies have emerged as strong

performers in 2023 during broad weakness in the dollar on

expectations of a pause in the Federal Reserve’s rate-hike

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cycle.

In Brazil, the new government’s fiscal measures to boost

revenue and cut expenditure sent the real to a two-month high

last week, while Mexico’s peso recouped all pandemic-driven

losses.

Traders cited a media report about Brazil’s President Luiz

Inacio Lula da Silva considering raising minimum wages in 2023

as a reason for the weakness in the real currency on Monday.

“The Lula administration has had a few rough weeks, with

mixed messaging from new ministers and the siege of Brasilia by

former President (Jair) Bolsonaro supporters,” said Lawrence

Brainard, Chief EM Economist at TS Lombard.

“The farcical coup attempt will, in our view, only

strengthen Lula’s position, while initiatives by the new Finance

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Minister Fernando Haddad should reassure markets that Lula will

achieve further fiscal reform.”

However, on Monday Brazil’s Bovespa index fell 1.8%

in thin volumes due to a holiday in U.S. markets.

Iron ore miner Vale was the biggest drag, sliding

2.0% as prices of the steel-making ingredient slipped on China

demand worries.

Americanas SA sank 38.7% after a second industry

group filed a lawsuit against the retailer after it revealed

almost $4 billion in “accounting inconsistencies” and its CEO

and CFO resigned.

The move followed news that Americanas could be liable to

repay up to 40 billion reais ($7.81 billion) in debt earlier

than planned, a Brazilian court said last week.

Planemaker Embraer SA jumped 3.8% after it said

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it had secured a new firm order for 15 new E195-E2 aircraft from

an undisclosed customer.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1028.74 -0.11

MSCI LatAm 2246.45 -1.9

Brazil Bovespa 108935.23 -1.79

Mexico IPC 53503.14 -0.14

Chile IPSA 5156.11 -0.01

Argentina MerVal 250972.87 3.642

Colombia COLCAP 1328.38 -0.68

Currencies Latest Daily %

change

Brazil real 5.1479 -0.81

Mexico peso 18.7877 -0.18

Chile peso 821.30 -0.5

Peru sol 3.818 -0.53

Argentina peso (interbank) 182.1500 -0.48

(Reporting by Susan Mathew and Sruthi Shankar in Bengaluru;

Andre Romani in Sao Paulo; editing by Deepa Babington and Josie

Kao)

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