EMERGING MARKETS-Most Latam FX rise as dollar slides; Brazil’s real muted ahead of rate decision

By Devik Jain and Susan Mathew

Oct 26 (Reuters)Most commodity-linked Latin American currencies rose on Wednesday as copper and oil prices got a boost from a softer US dollar, while Brazil’s real slipped ahead of a central bank decision due later in the day.

The Chilean pesos CLP= climbed 1.8%, up for the second straight day after losing nearly 6% in nine days until last week. Copper producer Peru’s sol PEN= currency also added 0.4% against the dollar.

Oil exporter Mexico’s pesos MXN= and Colombian pesos COP= also gained 0.2% and 1.6% respectively, tracking crude prices. O/R

Brazil’s real BRL=, BRBY dipped 0.1% ahead of a central bank decision due later in the day, where rates are expected to remain unchanged at 13.75% as core inflation continues to run above the Banco Central do Brasil’s target.

While emerging markets started their monetary policy tightening cycles well before developed economies, inflation has consistently exceeded expectations in those countries.

The dollar index =USD fell 0.7% after weak US economic data suggested that the US Federal Reserve’s aggressive policy to tame inflation is beginning to bite and spurred hopes of less hawkish interest rate hikes.

“We definitely see another revival of some Fed pivot hopes. Every time we are seeing the smallest signs that the Fed may be getting a little less hawkish – the market jumps at it,” said Witold Bahrke, senior macro strategist at Nordea Asset Management.

“In order for us to get more long term bullish on EM rather than tactically constructive here, we also need signs of capitulation, we are closer to a bottom in economic momentum and it’s too early for that.”

Elsewhere, Hungary’s forint EURHUF= jumped 1.4% against the euro supported by the Hungarian central bank’s pledge on Tuesday to offer its quick deposit tool at an 18% rate as long as necessary.

The South African rand dice= rose 1% to trade at 18.0170 against the dollar after its National Treasury said fiscal outlook has improvedwith deficits seen shrinking quicker than before and debt stabilizing at a lower level.

However, a government plan to take on part of struggling state utility Eskom’s 400 billion rand ($22 billion) debt was not ready.

“Though Treasury suggested the Eskom debt transfer could be a one-off tranche of multiple tranches, just assuming a 200 billion rand transfer in 2023 would push the debt to GDP ratio about 3.0pp higher,” Gina Schoeman, economist at Citibank South Africa, wrote in a note.

“And accounting for the expenditure risks in the outer years leaves our trajectory stuck just above 75% of GDP.”

Focus was also on developments surrounding Brazil’s election, with the lattest poll showing presidential candidate Luiz Inacio Lula da Silva’s lead over President Jair Bolsonaro widening ahead of a runoff vote on Oct 30.

Key Latin American stock indexes and currencies at 1424 GMT:

stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

853.94

1.12

MSCI LatAm .MILA00000PUS

2198.98

-0.05

Brazil Bovespa .BVSP

113357.08

-1.11

Mexico IPC .MXX

48912.54

0.56

Chile IPSA .SPIPSA

5157.74

-0.13

Argentina MerVal .MERV

144950.86

0.689

Colombia COLCAP .COLCAP

1208.21

-0.08

Currencies

Latest

Daily % change

Brazil real BRBY

5.3234

-0.07

Mexican pesos MXN=D2

19.8403

0.12

Chilean pesos CLP=CL

951

1.46

Colombian pesos COP=

4884.5

1.62

Peru left PEN=PE

3.9838

0.10

Argentine peso (interbank) ARS=RASL

155.3600

-0.18

Argentine peso (parallel) ARSB=

289

0.69

(Reporting by Devik Jain in Bengaluru)

(((Devik.Jain@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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