Tuesday, July 5

Chilean peso rises after rate hike, outperforms Latam peers


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Chile’s peso rose on Wednesday after its

central bank raised interest rates overnight and signaled more

increases, while Latin American stocks fell as global risk

sentiment sourced on fears around economic growth amid surging

inflation.

The peso strengthened 0.3% against the dollar after

Chile’s central bank raised its benchmark interest rate

by 75 basis points (bps) to 9.0%, and suggested

more increases were coming as it battles rising inflation.

“The bank considered that the local financial market has

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performed more favorably than its external peers, and the

economy has been receding at a slower-than-expected pace;

However, headline inflation has continued to rise,” Credit

Suisse analysts wrote in a client note.

“We think that this likely puts the floor on the policy rate

at 9.5%, assuming the minimum two adjustments of 25bps each.”

The central bank also raised its economic forecast, saying

the Chilean economy would expand between 1.5% and 2.25% this

year, after last year’s solid recovery from the coronavirus

pandemic.

Santiago stocks fell 1.4%.

Latin American equities lagged their

emerging market peers that drew comfort from gains in

Chinese shares, which ended at their highest level in

two months on hopes of a recovery in demand on loosening

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COVID-19 curbs.

Reuters reported that China has widened the gap on the

United States in trade terms in large parts of Latin America

since US President Joe Biden came into office early last year,

according to data, underscoring how Washington is being pushed

onto the back foot in the region.

The resource-rich South and Central Americas export a number

of products to China ranging from industrial metals, oil and

agricultural goods.

The Mexican peso was subdued as investors eyed its

May inflation data on Thursday, while stocks fell 0.9%.

Brazil’s real fell 0.2% in volatile trading,

extending losses after touching two-week lows in the previous

session as government proposed tax cuts aimed at curbing soaring

diesel and gas prices raised worries about the country’s fiscal

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health.

Brazil’s government is mulling measures to ensure a plan to

slash a state fuel tax is reflected in prices at the pump, two

sources close to the matter told Reuters.

Sao Paulo stocks shed 1.5% and hit over two-week

lows, with Vale SA dragging.

The miner fell 3.7%. It said it was launching a venture

capital initiative called Vale Ventures to invest $100 million

in mining startups around the world.

Meanwhile, an opinion poll showed Brazil’s leftist leader

Luiz Inacio Lula da Silva holding a strong lead against

incumbent President Jair Bolsonaro for the October election.

Latin American stock indexes and currencies at 1932 GMT:

Stock indexes Latest Daily % change

MSCI Emerging 1073.39 1.17

Markets

MSCI LatAm 2351.57-1.16

Brazil Bovespa 108245.17 -1.66

Mexico IPC 49722.58 -0.83

Chile IPSA 5284.41 -1.39

Argentina MerVal 89932.70 -1.106

Colombia COLCAP 1560.92 -1.65

Currencies Latest Daily % change

Brazil real 4.8823 -0.22

Mexico peso 19.5731 0.04

Chile peso 822.2 0.22

Colombia peso 3795.6 -0.47

Peru sol 3.7546 -0.42

Argentina peso 121.4500 -0.13

(interbank)

Argentina peso 205 0.49

(parallel)

(Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in

Bengaluru

Editing by Mark Potter and Grant McCool)

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