Chilean peso set for worst week in more than a decade

Chilean peso set for worst week in more than a decade

By Susan Mathew

Aug 19 (Reuters) - The Chilean peso fell nearly 2% on Friday, leading declines among Latin American currencies and putting it on track for its worst week in almost 14 years, as doubts about demand for copper, its most important export, unnerved investors.

With top metals consumer China struggling with an economic slowdown as it battles COVID-19, copper prices have been volatile.

Chile, the world's biggest copper producer, saw its currency slide more than 7% this week, on course for its worst weekly performance since October 2008.

Data on Thursday showed that Chile's GDP grew 5.4% in the second quarter, below expectations of economists in a Reuters poll.

"We anticipate quarterly declines in real GDP in the second half of the year," Credit Suisse analysts said.

A stronger dollar also weighed on risk appetite this week. The greenback found support on hawkish comments by Federal Reserve officials who signaled the U.S. central bank would keep hiking interest rates to tame inflation.

Mexico's peso MXN= lost 0.2%, on track for its sharpest weekly decline in more than a month, while Brazil's real BRBY slipped 0.2%.

A Brazilian poll on Thursday showed leftist former President Luiz Inacio Lula da Silva's lead over far-right incumbent Jair Bolsonaro narrowing ahead of a presidential election in October.

Lula, the front-runner in the race, aims to recreate ministries closed by Bolsonaro if he wins the election, aides said, as part of plans to bolster industrial development and state planning.

A Lula government is not likely to continue Bolsonaro's privatization agenda, though it is also not expected to return to the increased state interventionism of former President Dilma Rousseff, said Wilson Ferrarezi, an economist with TS Lombard.

"A more centrist government is the most likely outcome."

Stocks in Latin America also fell, with Brazil's Bovespa index .BVSP down 1.4% on the back of declines in mining, energy and bank shares.

Mexico's IPC index .MXX dropped 0.6%.

Fitch Ratings on Thursday said it has downgraded Mexican leasing firm Unifin Financiera's UNIFINA.MX long-and short-term foreign and local currency issuer default ratings (IDRs) to 'RD' from 'C', following the firm's payment default on some credit facilities.

Shares of Unifin has tumbled more than 80% since flagging last week that it would miss debt repayments.

In Argentina, the tightly controlled peso ARS= was flat. Economy Minister Sergio Massa on Thursday stressed the need to boost hard currency reserves, pointing to new debt repurchase operations that could help, as well as advances in talks with the country's key farm sector.

Key Latin American stock indexes and currencies at 1405 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

1000.60

-0.89 .MSCIEF

MSCI LatAm

2194.43

-1.64 .MILA00000PUS

Brazil Bovespa

112260.63

-1.36 .BVSP

Mexico IPC

48417.80

-0.64 .MXX

Chile IPSA

5312.60

-0.62 .SPIPSA

Argentina MerVal

-

- .MERV

Colombia COLCAP

1324.95

0.06 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.1810

-0.20 BRBY

Mexico peso

20.1756

-0.35 MXN=D2

Chile peso

946.1

-1.87 CLP=CL

Colombia peso COP=

4399.54

-0.36 Peru sol

3.8359

-0.14 PEN=PE

Argentina peso

136.0300

-0.15 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru; Editing by Paul Simao