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EMERGING MARKETS-Brazil's real hits 6-week low as trade tensions intensify

Sruthi Shankar

* Petrobras posts its highest-ever quarterly profit

* Latin American currencies suffer worst day in 2019

* Brazil's real weakens to lowest level in six weeks

(Updates prices, adds analyst comment) Aug 2 (Reuters) - Brazil's real hit a six-week low on Friday, leading losses among Latin American currencies as an escalation in U.S.-China trade tensions turned investors risk-averse, although upbeat production numbers from oil firm Petrobras lifted Sao Paulo- listed shares. The MSCI index of Latin American currencies extended its slide for a second day and was on course to post its worst week of 2019 after U.S. President Donald Trump on Thursday vowed to hike tariffs on Chinese imports starting on Sept. 1, prompting retaliation from Beijing. Emerging market assets had already been under pressure this week after the U.S. Federal Reserve played down expectations of many interest rate cuts this year, underwhelming many investors who had hoped for a more dovish stance. The real sank for the fifth day, touching its weakest level in over six weeks at 3.8927, with investors eyeing a second round of votes on the pension reform bill in the lower house of Congress next week. "With no significant local triggers on the horizon, the BRL's direction will be dictated by the broad USD. The pension reform story has played out," Citi analysts wrote in a note. A broadly firm dollar hurt other currencies, with Mexico's peso, the Colombian peso and the Chilean peso falling between 0.4% and 1.3%. Stock markets in the region mostly fell, although Brazil's Bovespa bucked the trend. Shares of Petrobras jumped 4% after the state-owned company posted a long-awaited production boost in July and recorded its highest-ever quarterly profit.

Meanwhile, Vale's shares fell more than 1% as iron ore prices slumped after a resumption at the company's largest mine pushed Brazil's iron ore exports to a nine-month high. Mexico's IPC index and stocks in Chile recorded their fourth straight week of losses, while shares in Colombia were supported by recovering prices of oil, the country's top export. A central bank forecast showed Colombia's current account deficit will expand to 4.4% of gross domestic product this year, resulting from an increase in imports and a fall in the export of commodities like coal and the meager performance of the country's trading partners.

Key Latin American stock indexes and currencies at 1954 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1002.45 -2.16MSCI LatAm 2757.22 -1.37Brazil Bovespa 102494.16 0.36Mexico IPC 40038.93 -0.76Chile IPSA 4894.24 -0.94Argentina MerVal 41416.36 0.012Colombia IGBC 12604.63 0.69Currencies Latest Daily %

change

Brazil real 3.8893 -1.3Mexico peso 19.3110 -0.41Chile peso 712.5 -0.86Colombia peso 3382 -1.28Peru sol 3.355 -0.86Argentina peso 44.6200 -0.52

(interbank)

(Reporting by Sruthi Shankar in Bengaluru Editing by Matthew Lewis)