Emerging market currencies rallied on
Tuesday, erasing session losses as the dollar slid after
datasignaledd the U.S. economy might be cooling, tempering bets
of a large interest hike by the Federal Reserve next month.
Latin American currencies led the charge, with Brazil’s real
jumping 1.4%, while Mexico’s peso looked set for its best
session in two weeks.
The dollar, which at more than a one-month high amid
recession worries had pressured riskier currencies earlier on
Tuesday, dropped 0.6% after data showed U.S. home sales fell in
July and private sector activity contracted again in August.
This weakened bets for a third consecutive 75-basis-point
rate hike by the Fed at its Sept. 20-21 meeting. Earlier this
week, Fed officials called for the central bank to speed up its
monetary policy tightening, dulling risk appetite.
“Much weaker than expected data is suggesting that the U.S.
economy may be contracting much faster than the market
anticipated and that is going to lead to a much more neutral Fed
stance,” said Boris Schlossberg, managing director at BK Asset
“The market was in this mode of the Fed absolutely,
resolutely hiking 75 basis points and now there is a much
greater doubt of that. U.S. yields came in and killed the dollar
because it was so grossly overbought, and everything against a
dollar just popped.”
South Africa’s rand reversed session losses to jump
0.3%, as did several Asian currencies, with China’s yuan
rising 0.2% after hitting two-year lows.
Chile’s peso moved decidedly away from its weakest
level in one month, surging 1.0%, as the currency was also
bolstered by rising copper prices. Crude exporter Colombia’s
currency rose 0.5%.
Central and eastern European currencies, however,
underperformed, pressured by economic growth worries amid doubts
about Russian gas supplies.
Hungary’s forint lost 1.1%, hitting six-week lows.
Among stocks, MSCI’s index of EM stocks had hit
three-week lows as Asian stocks sold off amid China growth
But an equities recovery in emerging Europe, Middle East and
Africa capped losses, and gains in Latam stocks further reduced
those losses as a labored rise in U.S. stocks and rising
commodity prices helped.
Brazil’s Bovespa index jumped 1.6%, with miners and
energy stocks leading gains as oil, copper and iron ore prices
Meanwhile in Cuba, the government announced on Monday it
would begin exchanging dollars and other foreign currency for
the local peso on a limited basis after a two-year hiatus during
which residents turned to an informal money market for the cash.
Key Latin American stock indexes and currencies at 1452 GMT:
Stock indexes Latest Daily %
MSCI Emerging Markets 990.41 -0.15
MSCI LatAm 2226.66 2.71
Brazil Bovespa 112262.34 1.59
Mexico IPC 48167.26 0.31
Chile IPSA 5359.96 0.36
Argentina MerVal 135076.71 2.135
Colombia COLCAP 1306.63 1.03
Currencies Latest Daily %
Brazil real 5.0915 1.41
Mexico peso 19.9988 0.67
Chile peso 927.9 0.97
Colombia peso 4370.95 0.50
Peru sol 3.8494 0.51
Argentina peso 136.8700 -0.16
(Reporting by Susan Mathew in Bengaluru; Editing by Paul Simao)