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EMERGING MARKETS-Latam FX weakens as U.S. recession worries come to fore

political uncertainty after an Aug. 11 primary election.

Aug 28 (Reuters) - Latin American currencies weakened against the dollar on Wednesday amid worries about the U.S. economy slipping into recession in the face of a bruising trade war with China. The Brazilian real dropped 0.5% to trade at 4.1527 per dollar, on course to give up gains made on Tuesday after the central bank sold dollars in the spot market, intervening for the first time in 10 years as the currency hit its weakest level in almost a year. The central bank also announced plans to sell up to $1.5 billion in the spot market on Wednesday but with repurchase commitments, on top of a planned $550 million spot market sale. "We think the USD sale will help slow down the pace of BRL depreciation as spot gets close to 4.20, but will not be able to hold it back if the external environment remains unfavorable," Citi's Dirk Willer wrote in a client note. A deepening inversion of the U.S. yield curve, considered a classic recession signal, raised fears of global economic downturn as the United States and China showed little signs of backing off their trade war that has roiled financial markets.

The U.S. Trade Representative's office reaffirmed President Donald Trump's plans to add an additional 5% tariff on a $300 billion list of Chinese imports starting on Sept. 1 and Dec. 15.

The Mexican peso held flat ahead of a key inflation data, while currencies of Colombia and Chile fell about 0.2%. The Argentine peso dropped about 3% and bonds prices fell as the central bank sold $115 million of its reserves in two interventions aimed at controlling the peso's fall.

Worries about the country's ability to meet its dollar-denominated debt obligations since the peso got trounced A jump in oil prices supported most stock markets, with Brazil's Bovespa and Colombian equities gaining about 0.4%.

Latin American stock indexes and currencies at 1436 GMT:

Stock indexes Latest Daily %


MSCI Emerging Markets 964.37 -0.02MSCI LatAm 2498.94 0.5Brazil Bovespa 97695.97 0.43Mexico IPC 40777.03 0.32Chile IPSA 4601.49 -0.08Argentina MerVal 25379.80 3.076Colombia IGBC 12448.94 0.46Currencies Latest Daily %


Brazil real 4.1527 0.52Mexico peso 20.0030 -0.07Chile peso 724.7 -0.30Colombia peso 3475.61 -0.24Peru sol 3.395 -0.06Argentina peso 57.7500 -2.51


(Reporting by Sruthi Shankar in Bengaluru Editing by Alistair Bell)