SAO PAULO/MEXICO CITY, Aug 9 (Reuters) - Major Latin American currencies fell against the dollar on Thursday as global trade tensions strengthened the greenback and political uncertainty in Brazil hit sentiment as Latin America's largest economy heads into a presidential election. The dollar gained against most currencies as investors bet that trade war posturing and a strong U.S. economy would continue to aid the currency. Trade tensions are seen as beneficial for the U.S. dollar as the United States is better placed then emerging markets to deal with protectionism, and tariffs may narrow the U.S. trade deficit. "You've seen idiosyncratic stories start to morph slowly into a generalized EM selloff today. I don't necessarily see this as the start of something broader, but yes, today what seemed to be a few pockets of weakness has spread across the board," said Ilya Gofshteyn, macro strategist at Standard Chartered Bank in New York. Late on Wednesday, Chinese state media accused the United States of having a "mobster mentality," while a key World Trade Organization metric on Thursday indicated that global trade in goods is likely to lose momentum in the third quarter. Brazil's real currency was especially hard hit, after two polls showed right-wing populist Jair Bolsonaro tying with market-friendly centrist Geraldo Alckmin in the key state of Sao Paulo ahead of the October presidential election. Traders were also spooked by a Supreme Court decision increasing some government salaries by over 16 percent in 2019. "Apparently, the powers that be do not understand the seriousness of Brazil's fiscal situation," said Alvaro Bandeira, head economist at brokerage Home Broker ModalMais. Brazil's real fell 0.95 percent in trade, while the Mexican pesoMXN=D2> was off 0.98 percent and the Chilean peso slipped a more modest 0.26 percent. In equities markets, the biggest major mover was Argentina's benchmark Merval index, which rose 1.11 percent after an unfolding corruption probe there hit the index hard in recent sessions. The Argentine index had climbed 2.06 percent in mid-day trade amid what traders called a technical correction, after the index fell 8.71 percent Monday through Wednesday. Key Latin American stock indexes and currencies at 1940 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 1,076.82 -0.27 -6.8 MSCI LatAm 2,652.63 -1.88 -4.41 Brazil Bovespa 78,806.84 -0.44 3.15 Mexico IPC 49,240.51 -1.31 -0.23 Argentina MerVal 26,970.63 1.11 -10.29 Colombia IGBC 12,060.49 -1.05 6.07 Venezuela IBC 106,408.80 4.22 235.62 Currencies Latest Daily YTD pct pct change change Brazil real 3.8012 -0.95 -12.84 Mexico peso 18.6515 -0.98 5.62 Chile peso 646.6 -0.26 -4.94 Colombia peso 2910.8 -0.07 2.45 Peru sol 3.27 -0.03 -1.01 Argentina peso (interbank) 28.0800 -1.53 -33.76 Argentina peso (parallel) 27.9 -0.36 -31.08 (Reporting by Gram Slattery in Sao Paulo; Additional reporting by Jorge Otaola in Buenos Aires, Tom Finn in London and Rodrigo Campos in New York Writing by Anthony Esposito Editing by Alistair Bell and Phil Berlowitz)
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