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Emerging Markets-Latam Fx at Three-Week Low; Chile, Mexico Minutes Awaited

Chile, Mexico meeting minutes expected * EMFX to hold gains into 2024 if cbanks hold rates- Poll * Improving economic outlook to support Brazil real- Poll * Argentina to hold rate at 97%- sources * Latam FX down 1%, stocks slide 2.4% By Ankika Biswas July 6 (Reuters) – Latin American currencies hit a three-week low on Thursday as the prospect of U.S. interest rates staying higher for longer steered traders away from risk assets, and the focus turned towards central bank meeting minutes from Mexico and Chile.

The MSCI index for Latam currencies dropped 1%, set for its steepest three-day percentage decline since mid-March, with intensifying U.S.-China tensions also weighing. Data signaling a resilient U.S. labor market and hawkish Federal Reserve meeting minutes increased expectations that the high rate regime in the world’s largest economy may persist for longer. Chile’s peso and Mexico’s peso shed over 1% each ahead of their June meeting minutes due to be published on Thursday. Chile’s central bank kept its benchmark rate unchanged and noted the possibility of rate cuts in the short term, while the Bank of Mexico also maintained its rate and said it was likely to hold it “for an extended period” as inflation remains above target. Goldman Sachs analysts will be watchful of what led two Chile central bank directors to vote in favor of the cutting cycle starting in June, while they expect Mexico’s minutes to widely acknowledge progress on disinflation, resilient domestic economic activity and a strong labor market.

A Reuters poll showed emerging market currencies were likely to hold gains into next year provided their respective central banks maintain or only moderately prune rates that have boosted carry trades. Weak copper prices also punished top producer Chile’s peso and second-largest producer Peru’s sol. Top crude oil exporter Colombia’s peso and the Mexican peso were also hurt by lower prices of the commodity. Brazil’s real lost 1% on Thursday, with a Reuters poll revealing that it is likely to receive near-term support from expectations of stronger economic growth and economic reforms, despite the likelihood of less favorable interest rate differentials ahead. Reuters reported Argentina’s central bank is set to hold its benchmark rate steady at 97% in the near term on optimism that monthly inflation will slowly ease, providing a boost for the government ahead of primary elections next month.

The Argentinian peso was up 1% in black market trading. The MSCI index for Latam stocks slid 2.4% to the lowest in nearly a month, dragged by an over 1% decline each in the benchmark indexes of Brazil and Argentina . Shares of Brazilian homebuilder MRV fell 3% after it filed for a follow-on share offering, initially looking to sell 58.64 million new shares. Meanwhile, Wall Street bank Citi found in its quarterly survey that investors in emerging market hard-currency bonds are taking a glum view on China going into the third quarter owing to skepticism around stimulus talks.

Mexico was able to maintain its position as the most popular OW (overweight), followed by Brazil and Colombia, the survey showed. Key Latin American stock indexes and currencies at 1453 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 982.31 -1.88 MSCI LatAm 2401.68 -2.43 Brazil Bovespa 117960.56 -1.33 Mexico IPC 53496.87 -1 Chile IPSA 5787.52 -0.82 Argentina MerVal 428240.97 -1.944 Colombia COLCAP 1115.43 -0.56 Currencies Latest Daily % change Brazil real 4.9002 -1.00 Mexico peso 17.2133 -1.22 Chile peso 804.8 -1.01 Colombia peso 4155.21 -0.71 Peru sol 3.6432 -0.62 Argentina peso (interbank) 260.3000 -0.27 Argentina peso (parallel) 487 1.03 (Reporting by Ankika Biswas; editing by Barbara Lewis).

Source : Yahoo Finance