Latam FX heads for best month since May

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Currencies in Latin America were on

track for their best monthly performance in eight months as the

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U.S. dollar tumbled from multidecade highs on expectations that

the Federal Reserve will soon slow the pace of its interest rate

hikes.

The MSCI’s index for Latin American currencies

was 0.3% higher at 1500 GMT and was on track for

its best month since May, outperforming the broader emerging

market index.

Investors were focused on a host of central bank rate

decisions this week from developed market peers, with a Federal

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Reserve rate decision on Wednesday, as well as Bank of England

and European Central Bank rate decisions on Thursday.

“Massive inflows into EM assets so far this year show that

investors are not deterred by the narrowing rate differentials,”

Natalia Gurushina, emerging markets fixed income economist at

VanEck, said in a note.

The International Monetary Fund on Monday raised its output

growth estimate on emerging markets for this year, with

projections now showing the economic slowdown in the region may

have bottomed out in 2022.

Brazil and Mexico, Latin America’s largest economies, were

both upwardly revised in their 2023 economic growth by 0.2 and

0.5 percentage point, respectively.

The Mexican peso edged up against the dollar, lagging

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other Latin American peers.

Data showed Mexico’s economic growth slowed to 0.4% in the

fourth quarter amid tighter monetary conditions in Latin

America’s second-largest economy, but still ended 2022 in

positive territory.

Meanwhile, two company sources told Reuters that Mexican

state oil firm Petroleos Mexicanos (Pemex) will issue a bond

soon worth around $1.5 billion to refinance debt.

The Colombian peso recovered 0.7% to 4,619 against

the dollar after sharp losses in the last two sessions.

The currency of Latin America’s fourth largest economy was

on track for its best month since November 2020, even as

inflation remained persistent despite signs of slowing growth.

The technical team of Colombia’s central bank on Monday

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revised its inflation projection for this year to 8.7% from 7.1%

previously, amid high prices which have led the bank’s board to

make sharp increases in borrowing costs.

Currencies of copper producers Chile and Peru

added 1.2% and 0.2%, respectively, supported by a muted dollar,

while the Brazilian real gained 0.6% against the

greenback.

Brazil’s economic policy secretary Guilherme Mello said

discussions on changing inflation targets were not on the agenda

of the Finance Ministry.

Key Latin American stock indexes and currencies at 1500 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1031.57 -1.19

MSCI LatAm 2334.87 0.63

Brazil Bovespa 113252.27 0.87

Mexico IPC 54261.26 -0.48

Chile IPSA 5327.94 -0.19

Argentina MerVal 248404.33 1.029

Colombia COLCAP 1274.25 -0.47

Currencies Latest Daily %

change

Brazil real 5.0831 0.60

Mexico peso 18.7555 0.03

Chile peso 797.4 1.19

Colombia peso 4631 0.43

Peru sol 3.8479 -0.26

Argentina peso (interbank) 186.8800 -0.16

Argentina peso (parallel) 379 1.06

(Reporting by Bansari Mayur Kamdar in Bengaluru; editing by

Jonathan Oatis)