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Latin American politics threaten some of 2017’s best performing EMs
There is growing concern in the region amid protests and contentious elections
Felipe Pacheco writes for Bloomberg on pressure points mounting in Latin American markets in recent days.
- Venezuelan 10-year sovereign bonds dropped to the lowest level in more than six months following the decision of the Constitutional Court to take over duties of the opposition-controlled National Assembly. However, this was followed by a positive sign when the decision was reversed over the weekend.
- The oil price trajectory will ultimately decide the fate of Venezuelan bonds.
- A rebound in Paraguay’s US dollar-denominated bonds is under threat following violent protests in response to a proposal that would allow President Horacio Cartes to run for reelection.
- The results of the Ecuadorian election have been called into question following the election of leftist Lenin Moreno. The conservative opposition candidate has demanded a recount amid accusations of election fraud.
- Ecuador’s dollar-denominated bonds still offer a higher yield than the similarly rated Nigerian notes.
- Brazilian president Michel Temer continues to push forward with controversial austerity measures, despite a 73% disapproval rating. The real is now one of the five most volatile currencies, along with the Mexican and Colombian pesos, among the 31 major currencies tracked by Blooomberg.
- For the first time in almost a year, leveraged funds are shorting the US dollar versus the Mexican peso. Investors have noted a shift in President Trump’s tone from the harsh rhetoric of the campaign trail.
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