MARKETS-BRAZIL-MEXICO Brazil's real and Mexico's peso weaken amidst volatility concerns

Record ID: 142778

  • Title: MARKETS-BRAZIL-MEXICO Brazil's real and Mexico's peso weaken amidst volatility concerns
  • Date: 25th August 2015
  • Summary: SAO PAULO, BRAZIL (AUGUST 24, 2015) (REUTERS) VARIOUS OF SCREENS AT THE BRAZILIAN STOCK EXCHANGE SHOWING THE DROP IN THE MARKETS PEOPLE WATCHING THE SCREENS INSIDE THE STOCK EXCHANGE STUDENTS ON A SCHOOL TRIP WATCHING THE SCREENS AN EMPLOYEE ON THE TELEPHONE BEING WATCHED BY STUDENTS STUDENTS WATCHING SCREENS VARIOUS OF SCREENS EXTERIOR OF STOCK EXCHANGE CLOSE-UP OF LOGO READING (IN PORTUGUESE): "BOVESPA. BRAZILIAN STOCK EXCHANGE" ECONOMIST AND HEAD OF TOV CORRETORA CAPITAL MANAGEMENT FIRM, PEDRO PAULO, POINTING AT A GRAPHIC OF GLOBAL MARKET DROPS ON HIS COMPUTER SCREEN A MONITOR WITH MARKET RATES IN PAULO´S OFFICE (SOUNDBITE) (Portuguese) ECONOMIST, PEDRO PAULO, SAYING: "In light of the expectations that China´s growth is going to be slower, that China is going to have serious growth problems, our (Brazilian) companies suffer too. This means that certain agents run away and leave positions within companies, which leads to a general devaluation of assets and markets." VARIOUS OF ECONOMISTS WORKING IN TOV CORRETORA CAPITAL MANAGEMENT FIRM (SOUNDBITE) (Portuguese) ECONOMIST, PEDRO PAULO, SAYING: "We can expect some weeks of volatility. I do not think that governments are going to unite, I do not think there is going to be much coordination from the G20 countries, and this means that the volatility will continue. There is a great deal of uncertainty in the air." EMPLOYEE POINTING AT SCREEN WITH MARKET VALUES WHILST SPEAKING ON THE TELEPHONE CLOSE-UP OF EMPLOYEE POINTING AT SCREEN ILLUMINATED SIGN READING (IN PORTUGUESE): "DOLLAR RISES ONE PERCENT AGAINST THE REAL" MEXICO CITY, MEXICO (AUGUST 24, 2015) (REUTERS) ANGEL OF INDEPENDENCE MONUMENT CARS ON REFORMA BOULEVARD PEOPLE WALKING ON FOOTPATH WOMAN LOOKING AT NEWSPAPER FRONT PAGES NEWSPAPER FRONT LINE REPORTING ON INTERNATIONAL MARKET TURBULENCE EXTERIOR OF MEXICO'S STOCK EXCHANGE GENERAL VIEW OF MEXICO'S STOCK EXCHANGE PERSON WORKING AT STOCK EXCHANGE REUTERS MONITOR AT STOCK EXCHANGE SHOWING FALLS IN MARKETS MORE OF PEOPLE WORKING AT STOCK EXCHANGE MONITOR AT STOCK EXCHANGE GENERAL VIEW OF INTERIOR OF STOCK EXCHANGE (SOUNDBITE) (Spanish) LOCAL, PIETRO MUZZI, SAYING: "I think that there is strong speculation. Really I can't understand, Mexico is linked to the United States and I don't understand. Normally there is a benefit to the country with the dollar exchange rate because if the dollar goes well for our neighbour then it should be the same for us." EXTERIOR OF CURRENCY EXCHANGE SHOP EXCHANGE RATES AT SHOP (SOUNDBITE) (Spanish) FINANCIAL ANALYST, ALFREDO GONZALEZ, SAYING: "Today, it's been about seven or eight years since we have seen such a worrying difference, the Dow Jones falling 1,400 points, Mexico 2,800 points, which represents four or five per cent of the opening. This is prior to a crazy day however the market reacted very well, the exchange rate which fell at the end of the day made a little come back." EXTERIOR OF CURRENCY EXCHANGE SHOP WOMAN ENTERING CURRENCY EXCHANGE SHOP VARIOUS OF COUNTING MACHINE PROCESSING US DOLLARS
  • Embargoed: 9th September 2015 13:00
  • Keywords:
  • Location: Brazil
  • Country: Brazil
  • Topics: General
  • Reuters ID: LVAC3EQWU64XN2ZQRAW797EATTID
  • Aspect Ratio: 16:9
  • Story Text: Latin American's strongest currencies, Brazil's real and the Mexican peso, have taken a battering in recent days amidst fragile domestic markets and turbulence in Chinese mainland stocks.
    Brazilian stocks and currency against the dollar fell to six-year and 12-year lows respectively on Monday (August 24) after Chinese mainland stocks lost more than 8 percent and are now in the red for 2015, driving currencies in emerging markets to multi-year lows against the dollar while a benchmark equity index slumped more than 5 percent.
    The crash adds extra pressure to Brazil´s worst economic downturn in three decades, which has seen the dollar rise against the Brazilian real by 33,62 percent since the start of the year.
    The dollar rose by 1,62 percent on Monday (August 24) alone, reaching the value of 3,5525 reais, the highest closing price since March 5, 2003.
    For economist at TOV Corretora capital management firm in Sao Paulo, Pedro Paulo, the effect of weakening Chinese growth will have significant effects on the Brazilian market.
    "In light of the expectations that China´s growth is going to be slower, that China is going to have serious growth problems, our (Brazilian) companies suffer too. This means that certain agents run away and leave positions within companies, which leads to a general devaluation of assets and markets," Paulo told Reuters on Monday (August 24).
    "We can expect some weeks of volatility. I do not think that governments are going to unite, I do not think there is going to be much coordination from the G20 countries, and this means that the volatility will continue. There is a great deal of uncertainty in the air," Paulo added.
    Adding to this outlook is a growing political crisis in Brazil that has raised questions about President Dilma Rousseff´s ability to ride out her term.
    Describing the day as a black Monday for Latin American currencies, Berg advised clients to short the currencies of Chile, Brazil, and Mexico.
    Selling escalated across emerging markets, taking MSCI's benchmark equity index to six-year lows in its biggest one-day loss since September 2011.
    A member of Rousseff's economic team indicated that the government would continue to sell currency swaps and, perhaps, dollars with repurchase agreements. For now, Brazil has ruled out selling dollars from its foreign reserves.
    Closer to the US border, Mexico's peso slipped to a new low against the dollar in trading on Sunday (August 23), breaching the 17 pesos per dollar mark for the first time.
    Reuters data showed the peso fell to 17.100 per dollar just before 8.40 p.m. local time (0140 GMT). The currency also hit a record low on Friday (August 21).
    On the street, some could not understand how the Mexican economy's dependence on the U.S. market was not strengthening but undermining the peso.
    "I think that there is strong speculation. Really I can't understand, Mexico is linked to the United States and I don't understand. Normally there is a benefit to the country with the dollar exchange rate because if the dollar goes well for our neighbour then it should be the same for us," said local, Pietro Muzzi.
    In a speech to lawmakers from Mexico's ruling Institutional Revolutionary Party, or PRI, Finance Minister Luis Videgaray said the key objective for policymakers was to ensure that foreign exchange market conditions did not end up hurting consumers' spending power.
    Videgaray has added that authorities wanted to ensure there was sufficient liquidity in the peso market, but that they were not seeking to target a particular level against the greenback.
    Mexico City-based Financial analyst, Alfredo Gonzalez, described the market volatility as "worrying".
    "Today, it's been about seven or eight years since we have seen such a worrying difference, the Dow Jones falling 1,400 points, Mexico 2,800 points, which represents four or five per cent of the opening. This is prior to a crazy day however the market reacted very well, the exchange rate which fell at the end of the day made a little come back," he said.
    The Mexican peso has fallen by more than 15 percent against the dollar this year, and Mexico last month stepped up intervention to support the currency, with policymakers saying they could take further steps if necessary.
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