Currencies in Latin America advanced
against a retreating dollar on Tuesday, with Mexico’s peso
rising after new inflation estimates fueled bets that the
central bank will hike interest rates again at its upcoming
Inflation in Latam’s second-largest economy in the first
half of July likely remained at levels not seen since January
2001, a Reuters poll showed, raising bets the Bank of Mexico
will increase its key rate once again at its August meeting
following a record 75 basis point hike in June.
The country’s economy likely grew by 2.1% in June compared
with a year earlier, but relative to the previous month,
activity is expected to have contracted by 0.4% in June,
estimates from the national statistics agency showed.
“A (recovery in currencies) comes on the back of very large
falls last week, (but) it’s going to be a challenging
environment over the rest of the year if the U.S. Federal
Reserve is tightening aggressively,” said William Jackson, chief
emerging markets economist at Capital Economics.
The dollar eased from two-decade highs as markets
pared bets of a 100 basis point hike by the Fed next week.
Brazil’s real gained 0.9%.
President Jair Bolsonaro invited the diplomatic corps on
Monday to hear his charges that Brazil’s election system was
open to fraud ahead of October elections in which he is trailing
in a bid for a second term.
“We’ve seen big swings in the real over the past year
triggered by perceived political risk, but now, a lot of that
bad news is priced in, so a Lula government proving to be more
moderate might help support the currency,” added Jackson.
Chile’s peso jumped 2%, leading regional gains for a
third straight day after an intervention last week by the
central bank propped up the struggling currency, while
Colombia’s peso inched up 0.3%.
Resource-rich Latam currencies have come off highs hit
earlier this year as a commodity boom loses steam on global
growth and demand fears, while concerns of a recession, rising
interest rates and inflation dynamics have sent stocks in the
region tumbling 7% this year.
Stocks were 0.5% higher, as Brazil’s
heavyweight Bovespa boosted shares with a 0.7% lift.
Brazil’s Embraer SA rose 1.7% after the planemaker
announced a partnership with BAE Systems PLC to expand
their footprint in the global defense market.
Elsewhere, sovereign dollar bonds issued by Pakistan
hit fresh record lows after ratings agency
Fitch cut the country’s outlook to “negative” from “stable.”
The Russian rouble firmed past 55 against the
dollar to a more than two-week high. This week, the central bank
is likely to trim the key rate by 50 basis points to 9%.
Key Latin American stock indexes and currencies at 1450 GMT:
Stock indexes Latest Daily % change
MSCI Emerging Markets 980.13 -0.04
MSCI LatAm 1983.04 0.38
Brazil Bovespa 97700.43 0.81
Mexico IPC 47129.09 0.44
Chile IPSA 5130.70 0.96
Argentina MerVal 106697.10 1.191
Colombia COLCAP 1294.40 0.99
Currencies Latest Daily % change
Brazil real 5.3853 0.74
Mexico peso 20.3946 0.31
Chile peso 933.4 1.02
Colombia peso 4287.6 0.20
Peru sol 3.8801 0.29
Argentina peso 129.1100 -0.15
Argentina peso 289 0.69
(Reporting by Anisha Sircar in Bengaluru
Editing by Alistair Bell)