Latin American currencies joined
their emerging market peers in the red on Monday as the dollar
edged up from seven-month lows, while Brazilian retailer
Americanas plummeted on the possibility of an $8 billion debt
Brazil’s real tripped 0.8% against the dollar,
while Mexico’s peso lost 0.2%, both looking to break
four-session winning streaks.
Both Latin American currencies have emerged as strong
performers in 2023 during broad weakness in the dollar on
expectations of a pause in the Federal Reserve’s rate-hike
In Brazil, the new government’s fiscal measures to boost
revenue and cut expenditure sent the real to a two-month high
last week, while Mexico’s peso recouped all pandemic-driven
Traders cited a media report about Brazil’s President Luiz
Inacio Lula da Silva considering raising minimum wages in 2023
as a reason for the weakness in the real currency on Monday.
“The Lula administration has had a few rough weeks, with
mixed messaging from new ministers and the siege of Brasilia by
former President (Jair) Bolsonaro supporters,” said Lawrence
Brainard, Chief EM Economist at TS Lombard.
“The farcical coup attempt will, in our view, only
strengthen Lula’s position, while initiatives by the new Finance
Minister Fernando Haddad should reassure markets that Lula will
achieve further fiscal reform.”
However, on Monday Brazil’s Bovespa index fell 1.8%
in thin volumes due to a holiday in U.S. markets.
Iron ore miner Vale was the biggest drag, sliding
2.0% as prices of the steel-making ingredient slipped on China
Americanas SA sank 38.7% after a second industry
group filed a lawsuit against the retailer after it revealed
almost $4 billion in “accounting inconsistencies” and its CEO
and CFO resigned.
The move followed news that Americanas could be liable to
repay up to 40 billion reais ($7.81 billion) in debt earlier
than planned, a Brazilian court said last week.
Planemaker Embraer SA jumped 3.8% after it said
it had secured a new firm order for 15 new E195-E2 aircraft from
an undisclosed customer.
Key Latin American stock indexes and currencies:
Latest Daily %
MSCI Emerging Markets 1028.74 -0.11
MSCI LatAm 2246.45 -1.9
Brazil Bovespa 108935.23 -1.79
Mexico IPC 53503.14 -0.14
Chile IPSA 5156.11 -0.01
Argentina MerVal 250972.87 3.642
Colombia COLCAP 1328.38 -0.68
Currencies Latest Daily %
Brazil real 5.1479 -0.81
Mexico peso 18.7877 -0.18
Chile peso 821.30 -0.5
Peru sol 3.818 -0.53
Argentina peso (interbank) 182.1500 -0.48
(Reporting by Susan Mathew and Sruthi Shankar in Bengaluru;
Andre Romani in Sao Paulo; editing by Deepa Babington and Josie