Emerging Markets: Brazil's real drops as Shanghai lockdown spurs demand worries

Rainforest Resources

28/03/2022 21:09

* Latam stocks, FX snap eight-day win streak
    * Chile to raise rates by 200 bps to 7.50%
    * Putin not seen ready to compromise ahead of peace talks

 (Updates prices, replaces comment, adds details)
    By Susan Mathew and Anisha Sircar
    March 28 (Reuters) - Brazil's real fell nearly 1% against a
stronger dollar on Monday, leading declines across emerging
market currencies, as a coronavirus lockdown in Shanghai spurred
worries about Chinese demand for commodities.
    Brazil's real  BRL=   BRBY  dropped 0.9%. Oil prices tumbled
about 7%, while base metals such as nickel also declined as
fears over weaker demand in China grew after Shanghai, the
country's financial hub, imposed a two-stage lockdown to curb a
surge in COVID-19 infections.  O/R   MET/L  
    Gold prices fell more than 1% as U.S. Treasury yields
vaulted and rate hike expectations helped lift the dollar to its
highest in two weeks  =USD  against a basket of six major peers.
 GOL/   FRX 
    An index of emerging market currencies  .MIEM00000CUS  was
down 0.5%, snapping eight consecutive days of gains, and led by
losses in commodity-linked currencies. 
    "Suddenly you have this massive amount of demand (from
China) taken off the market, which has been so overbought, and
so the entire commodities complex is reacting in concert," said
Boris Schlossberg, managing director of FX strategy at BK Asset
Management.
    South Africa's rand  ZAR=  lost 0.8%, while Mexico's peso
 MXN=  shed 0.4%.  urn:newsml:reuters.com:*:nL2N2VV15K
    Ukraine and Russia were preparing on Monday for the first
face-to-face peace talks in more than two weeks, but a senior
U.S. official said Russian President Vladimir Putin did not
appear ready to make compromises to end the war.  urn:newsml:reuters.com:*:nL2N2VV0AC
    In Latin America, investors will be looking ahead to some
central bank policy decisions, with Chile expected to raise its
key interest rate by about 200 basis points to 7.50% on Tuesday,
while Colombia on Thursday is seen hiking its policy rate by 150
basis points to 5.5%.  urn:newsml:reuters.com:*:nL2N2VV0GU urn:newsml:reuters.com:*:nS0N2VG00D
    "The moment the (U.S.) Fed goes into a tightening cycle, it
becomes incredibly onerous for EM currencies ... (Latam central
banks') tightening moves are to make sure they stay even and the
flood of capital isn't removed as a result of higher rates in
the U.S.," Schlossberg added.
    Despite the slide in oil, Colombia's peso  COP=  edged
higher. The currency has been up for eight straight weeks. 
    Latin American currencies have outperformed their emerging
market peers thanks to a surge in commodity prices due to the
sanctions imposed on Russia for its invasion of Ukraine. 
    Meanwhile, the U.S. Treasury yield curve briefly inverted
for the first time since early 2006, as a sell-off in the bond
market resumed, raising concerns about the risk of recession.
 urn:newsml:reuters.com:*:nL5N2VV1BE
    S&P Global cut its 2022 GDP growth estimate for Russia by
more than 11 percentage points to an 8.5% contraction, while its
forecasts for Poland and Turkey were shaved by more than 1
percentage point, due to the effects of the war in Ukraine.
 urn:newsml:reuters.com:*:nL2N2VV1UY
    The Polish zloty  EURPLN=  was down 0.3% against the euro.
    
    Key Latin American stock indexes and currencies at 1945 GMT:
    
   Stock indexes            Latest    Daily % change
 MSCI Emerging Markets       1125.31             0.03
  .MSCIEF                             
 MSCI LatAm                  2644.59            -0.59
  .MILA00000PUS                       
 Brazil Bovespa            118989.34            -0.08
  .BVSP                               
 Mexico IPC                 55706.30             0.49
  .MXX                                
 Chile IPSA                  4939.66            -0.51
  .SPIPSA                             
 Argentina MerVal           91922.60            -1.17
  .MERV                               
                                      
                                                     
      Currencies            Latest    Daily % change
 Brazil real                  4.7749            -0.60
  BRBY                                
 Mexico peso                 20.1081            -0.44
  MXN=D2                              
 Chile peso                    778.8            -0.27
  CLP=CL                              
 Colombia peso  COP=         3781.21             0.25
                                      
 Peru sol                      3.728             0.19
  PEN=PE                              
 Argentina peso             110.6800            -0.26
 (interbank)  ARS=RASL                
                                      
 Argentina peso                  197             2.54
 (parallel)  ARSB=                    
                                      
 
 (Reporting by Susan Mathew and Anisha Sircar in Bengaluru;
Editing by Paul Simao and Marguerita Choy)
 ((susan.mathew@thomsonreuters.com; +91-80-6287-2704;))