EMERGING MARKETS-Brazil real slammed, Colombia eyes weekend election

* Brazilian real down for third straight week * Colombia presidential vote on Sunday * Peru’s sol, Colombian peso only outperformers for week (Updates prices, details) By Shreyashi Sanyal and Bansari Mayur Kamdar June 17 (Reuters) – The Brazilian real tumbled on Friday against a firm dollar, tracking its third weekly decline, while Colombia’s peso dipped ahead of a presidential vote over the weekend where citizens will choose between a leftist and an eccentric businessman. The peso fell 0.2% as Colombians geared up to vote on Sunday for their next president, choosing between leftist Gustavo Petro, who promises social reforms, and business magnate Rodolfo Hernandez, who has campaigned against corruption despite facing a graft investigation. He denies the accusations. Polls point to this being the closest election in Colombia’s recent history. “Sunday’s election should be tight, though we believe Hernandez has a slight edge,” strategists at Citi wrote in a client note. “The COP has traded better versus its peers than Latam currencies typically do into elections, in part due to supportive flows and high oil prices. Rates, however, look high.” The peso is up 1.1% for the week, and Peru’s sol has added 1.5% – making them the only two major Latin American currencies to be trading higher on a weekly basis. Emerging markets have been pressured by aggressive monetary tightening from developed world economies, with the US Federal Reserve delivering its biggest hike to policy rate in more than a quarter of a century to tackle red-hot inflation. Worries also mounted about whether such hefty rate hikes could push the US economy into a recession, while China, the world’s second largest economy reimposed a strict lockdown measure. Higher rates in the developed world take the shine off emerging market assets, especially with a strengthening US dollar that would make it harder to pay back debt. Credit default swaps have reached alarming levels for especially countries such as Egypt, Pakistan, Tunisia, Kenya and Turkey. The MSCI’s index for Latin American currencies was down 0.6% on the day and 2% for the week, its stocks counterpart is tracking a 6.4% weekly drop. Brazil’s real fell 1.3% as local traders returned from a public holiday to a global bout of risk-aversion. The currency eyed its third straight weekly decline, posting falls of 2.6%. The central bank of Latin America’s biggest economy on Wednesday raised interest rates by 50 basis points, in line with prevailing market expectations, and signaled another increase coming in the world’s most aggressive rate-hiking cycle. Brazil’s Petrobras dropped 9% after it said it plans to hike fuel prices from Saturday as the country grapples with soaring inflation ahead of elections later this year. Mexico’s peso edged higher, while the Chilean peso fell 1%. Meanwhile, Peru’s central bank said it had reduced its growth projection for 2022 to 3.1% from 3.4% previously amid global economic volatility and a recent disruption to mining activity in the Andean nation. The sol was subdued. Key Latin American stock indexes and currencies at 1846 GMT: Stock indexes Latest Daily change MSCI Emerging Markets 1005.09 -0.3 MSCI LatAm 2100.56 -2.21 Brazil Bovespa 99089.98 -3.62 Mexico IPC 47914.50 0.75 Chile IPSA 5103.24 1.43 Argentina MerVal 87060.90 -1.588 Colombia C 0.88 Currencies Latest Daily% change Brazil real 5.1183 -1.78 Mexico peso 20.3330 0.33 Chile peso 876.4 -1.15 Colombia peso 3897.94 -0.18 Peru sol 3.7176 -0.54 Argentina peso (interbank) 122.9100 -0.17 Argentina peso (parallel) 213 1.88 (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru; Editing by Alison Williams)

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