* Real among best EMFX performers in 2021 * Strong oil prices offer little support to MXN, COP * Latam stocks also fall (New throughout, updates prices, market activity and comments) By Susan Mathew and Ambar Warrick July 1 (Reuters) – Latin American currencies weakened against the dollar on Thursday, with Brazil’s real and Chile’s peso sinking more than 1% each as investors stepped back ahead of key payrolls data from the United States this week. The real and Chile’s peso both relinquished early gains made on positive data, as investors worried about rising infections of the “delta” variant of the coronavirus. Manufacturing activity in Brazil hit four-month highs in June, PMIs showed, while Chile’s economic activity jumped a better-than-expected 18.1% in May. This follows disappointing activity numbers from Asia and Russia which dulled sentiment already hurt by worries over the virus. Mexico’s peso fell 0.3%, while Colombia’s peso shed 0.8%, taking little support from a rally in oil prices. The MSCI’s index of Latin American stocks fell more than 1%. “We’re more optimistic than most about the near-term economic outlook for Latin America, even though the region’s prospects are still dimmer than elsewhere in the emerging world,” said William Jackson, an emerging market economist at Capital Economics, citing strong activity numbers. Brazil’s real is among the best performing emerging market currencies so far this year, with a 3% gain. But concerns over local politics have cast doubts over whether the gains will hold. The dollar fell ahead of U.S. nonfarm payrolls data on Friday, which will be watched to see whether it would prompt the Federal Reserve to start tightening policy sooner than forecast. But despite the Fed’s hawkish tilt in its policy-setting committee’s last meeting, foreign net flows to emerging market equity and debt portfolios accelerated in June to nearly three times the May figure, data from the Institute of International Finance showed on Thursday. Still, the end of the coronavirus pandemic in Latam “remains a distant future,” the Pan American Health Organization said on Wednesday, with only one in 10 people fully vaccinated so far. While cases have been falling in Mexico, COVID-19-related deaths likely exceed the confirmed toll by about 60%, the country’s Health Ministry data released on Wednesday showed. In Brazil, calls for the impeachment of President Jair Bolsonaro rose as findings of a probe into the government’s handling of the pandemic led to the suspension of a $324 million COVID-19 vaccine procurement deal. Elsewhere, Belarus’s rouble snapped a three-day losing streak against the dollar. Ratings agency S&P kept Belarus’s rating unchanged after a review on Wednesday, saying European Union sanctions over Minsk’s forced landing of a passenger plane weren’t significant enough to change the picture of the country’s finances. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1366.67 -0.58 MSCI LatAm 2587.85 -1.25 Brazil Bovespa 125140.06 -1.31 Mexico IPC 50495.67 0.41 Chile IPSA 4345.80 0.33 Argentina MerVal 62052.61 -0.512 Colombia COLCAP 1255.51 0.53 Currencies Latest Daily % change Brazil real 5.0336 -1.15 Mexico peso 20.0022 -0.36 Chile peso 740.87 -1.24 Colombia peso 3776.5 -0.78 Peru sol 3.8675 -0.72 Argentina peso 95.7600 -0.03 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis and David Gregorio)
