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USA vs China: Latin American currencies suffer with the trade war

The bitter tariff dispute between the United States and China, which in recent days has escalated beyond what the markets expected, will have Latin American currencies this week trading under strong pressure.

US dollar bill and a Chinese yuan bill are seen between the United States and China flags

FILE PHOTO: A US dollar bill and a Chinese yuan bill are seen between the flags of the United States and China. REUTERS / Jason Lee / File photo

Reuters | Manuel Farías

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Leer en español: EE.UU vs China: las monedas de América Latina sufren con la guerra comercial

Beijing's decision to impose taxes on US imports worth about $ 75 billion, infuriated President Donald Trump, who, in addition to raising his own rates, ordered his country's companies to look for ways to leave China.

The escalation in the trade war between the two largest economies in the world completely eclipsed a long-awaited speech last Friday by Federal Reserve President Jerome Powell. The Fed chief's comments gave little light on whether the central bank will cut interest rates at its September meeting. Risk aversion caused the region's currencies to end on Friday with a drop of more than 1% and reach an eight-month floor.

For the Mexican peso "the forecast is not positive," said Alfonso Esparza, senior analyst at OANDA. "It will continue the evolution of the commercial war ... It is expected that the exchange rate can end up at 21 pesos per dollar if the aggressive rhetoric continues."

Also read: AMLO refuses to be worried about Mexican economy stagnation

On Friday, the currency of the second largest economy in Latin America reached 19.93 units per dollar after China's announcements.

In Argentina, attention will continue to be in the future presidential elections, after the primaries ended with a heavy blow on the re-election aspirations of President Mauricio Macri.

In addition, a technical team from the International Monetary Fund visited the country over the weekend to meet with government officials and economic advisors of the main candidates.

"The recession in Argentina puts more pressure on the currency and now the candidates have a greater responsibility with their declarations because the electoral battle can be won, but the economic war can be lost," Esparza said.

The Argentine peso fell 0.1% on Friday to accumulate a drop of 0.34% in the week and a crash of 18% in two weeks.

In Chile, meanwhile, the local peso, which traded at 718.20 buyer units and 719.50 seller units, would also be pressured by the trade war through a decline in the price of copper, the country's main export.

 

Coins per dollar         Value              Value Var pct               Var pct            Maximum                Minimum 

                                                             monthly              2018               Anual                    Anual

Real Brasil                    4,1196             -7,42                   -5,78               3,64                      4,13

Mexico Peso                 19,9150          -3,96                    -1,38              18,75                    19,94

Chilean Peso                 719,2             -2,32                    -3,54               648                       724

Colombian Peso            3.421,24         -4,24                    -5,20               3.068                   3.479

Sol Peru                         3,3750           -2,12                    -0,20               3,28                      3,40

Argentine Peso               55,15             -20,61                  -31,70             36,90                    62,00

 

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