Mexico's Peso sinks to two-year low amid Trump's tariff threats
Brazil's fiscal package to come out this week, finance minister says
Mexican President Sheinbaum urges dialogue with Trump
Latam FX down 0.34%; stocks down 0.41%
Updates with mid-session trading
By Shashwat Chauhan and Pranav Kashyap
Nov 26 (Reuters) - Mexico's peso took center stage in Latin America on Tuesday, suffering significant losses as it buckled under intense pressure following U.S. President-elect Donald Trump's vow to impose tariffs on all imports from Mexico, the region's second-largest economy.
Trump, who takes office on Jan. 20, said he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs and migrants crossing the border in a move that would appear to violate a free-trade deal.
The peso MXN= fell as much as 2.7%, hittingits lowest pointagainst the greenback sinceJuly 2022. It crawled back some losses and traded 2% lower at 20.69.
Mexican President Claudia Sheinbaum warned of dire economic consequences for both countries from tariffs and urged dialogue following Trump's threat, while hinting retaliation measures.
"It was a knee-jerk reaction, but a warranted one, given the interlinks between the Mexican and U.S. economy," Rachel Ziemba, founder of advisory firm Ziemba Insights said.
"Investors also are trying to process the Mexican president's response saying that they might impose counter measures - it just highlights the uncertainty and additional costs in the bilateral trade relationship."
Minutes from the Mexican central bank's last policy meeting, where it had cut interest rates by 25-basis-points, are scheduled to be released on Thursday.
Trump separately outlined "an additional 10% tariff, above any additional tariffs" on imports from China, sending the Chinese yuan CNH= down 0.2% in offshore trading.
Brazil's real BRL=, slipped 0.18%at 5.80 per dollar in choppy trading.
Late on Monday, Brazilian Finance Minister Fernando Haddad said a fiscal package with spending cut measures was finalized in a meeting with President Luiz Inacio Lula da Silva, adding the government will be ready to announce the details this week.
Data from statistics agency IBGE showed Brazil's consumer prices rose more than expected in the month to mid-November, further fueling bets that the central bank will keep hiking interest rates.
Latin American assets have run into turbulence in November, with currencies of Mexico and Brazil amongst the worst performers in emerging markets, as investors mull the implications of Trump's policies on trade, tariffs and immigration.
Continued repricing of the Federal Reserve's interest rate path has also helped the dollar globally, weakening EM currencies.
Minutes from the Fed's meeting earlier this month showed officials appeared divided at how much more they may need to cut interest rates.
MSCI's index for Latin American currencies .MILA00000CUS shed 0.3%,while a gauge for stocks .MILA00000PUS fell 0.4%.
Latin American stock estimates for 2025 have been cut due to increasing uncertainty about Mexico's outlook and Brazil's public finances, amid concerns of a possible correction in the near-term, a Reuters poll found.
Elsewhere in emerging markets, Nigeria's central bank raised its benchmark lending rate by 25 basis points to 27.50%, citing renewed inflationary pressures in Africa's most populous nation.
Key Latin American stock indexes and currencies:
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1087.15 | -0.46 |
MSCI LatAm .MILA00000PUS | 2075.89 | -0.41 |
Brazil Bovespa .BVSP | 130004.8 | 0.75 |
Mexico IPC .MXX | 49810.2 | -0.79 |
Chile IPSA .SPIPSA | 6558.17 | 0.14 |
Argentina MerVal .MERV | 2261178.1 | 1.92 |
Colombia COLCAP .COLCAP | 1395.42 | -0.22 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.8085 | -0.18 |
Mexico peso MXN= | 20.6904 | -2.02 |
Chile peso CLP= | 976.7 | -0.12 |
Colombia peso COP= | 4400.05 | -0.52 |
Peru sol PEN= | 3.763 | 0.27 |
Argentina peso (interbank) ARS=RASL | 1,007.0 | 0.00 |
Argentina peso (parallel) ARSB= | 1,115.0 | 1.33 |
Reporting by Shashwat Chauhan aned Pranav Kashyap in Bengaluru; Editing by Angus MacSwan and Marguerita Choy
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