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EMERGING MARKETS-Latam currencies shed 2019 gains as Sino-U.S. rift deepens

Agamoni Ghosh

May 17 (Reuters) - Latin American currencies fell to near five-month lows on Friday, wiping out their 2019 gains as the protracted trade war between the United States and China took its toll on riskier assets and a biting recession and high inflation hit Argentina's peso. MSCI's index of Latin American currencies was on track to record their fifth week of losses as trade headlines continued to hammer emerging market currencies. The week brought retaliation from both the United States and China, including Beijing imposing higher tariffs on most U.S. imports and President Donald Trump blocking China's Huawei Technologies from buying vital American technology. The Communist Party's People's Daily used a front page commentary on Friday to evoke the patriotic spirit of past wars, saying the trade spat would never bring China down. "We continue to see the near-term risks for EM tilted to the downside, and the risk of additional tariffs being implemented is rising," Morgan Stanley analysts said in a note. Brazil's real led losses among currencies in the region on dour economic forecasts and deepening uncertainty over the government's ability to get its flagship pension reform bill through. Central bank President Roberto Campos Neto acknowledged on Thursday that the economy may have contracted slightly in the first quarter and that controlling inflation hinged on the approval and implementation of fiscal reforms. Sao Paulo-traded stocks, which fell almost 2% in the previous session, managed to claw back into positive territory, helped by financial stocks and Vale. Mexican stocks were marginally higher, while the peso shed 0.3% a day after the central bank left borrowing costs steady, citing possible pressure on the currency's exchange rate as a risk for inflation to quicken. Chile's peso fell to its lowest levels this year, tracking a dip in the price of copper, the country's top export. Argentina's peso slipped 0.4% in early trade. The peso has slid almost 17% this year, hammered by a biting recession and high inflation, cranking up the challenge facing President Mauricio Macri's government ahead of elections in October.

Key Latin American stock indexes and currencies at 1415 GMT

Stock indexes daily %Latest changeMSCI Emerging Markets 996.72 -1.43MSCI LatAm 2528.15 -0.97Brazil Bovespa 90372.32 0.39Mexico IPC 43493.35 0.12Chile IPSA 4956.52 -0.43Argentina MerVal - -Colombia IGBC - -Currencies daily %

change Latest

Brazil real 4.0823 -1.13Mexico peso 19.1641 -0.23Chile peso 697.2 -0.50Colombia peso 3308.86 -0.34Peru sol 3.324 -0.21Argentina peso 45.0400 -0.53


(Reporting by Agamoni Ghosh; Editing by Dan Grebler)