Tuesday, October 19

Latam FX recover; stocks mixed as inflation, growth worries remain

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Latin American currencies erased session

losses on Tuesday to trade higher, with Chile’s peso recovering

from 17-month lows hit on concerns that weaker Chinese demand

could depress copper prices.

But investors remained on edge over a global energy crunch,

as well as a possible debt crisis in China, which is a major

export destination for Latin America.

A recent surge in oil prices raised concerns over high

inflation, which could stifle economic growth in emerging market

countries. The International Monetary Fund on Tuesday trimmed


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its 2021 global growth forecast to 5.9% from a previous estimate

of 6.0%, with China’s cut by 0.1 point to 8.0%.

Stocks in the region were mixed, with those in Chile

and Colombia losing 1%, pushing the latter

off their highest levels in over eight months, while main

indexes in Mexico and Argentina rose 0.5% and

0.3%, respectively.

“The IMF is concerned that surging prices will force central

banks into tightening cycles that could trigger sell-offs in

global equities,” said Edward Moya, senior Americas market

analyst at OANDA.

An index of world stocks was 0.2% lower,

with Wall Street making muted moves.

Currencies of oil exporters Mexico and Colombia

have gotten some support from crude prices in recent

weeks, although analysts say this could be short-lived


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Mexico’s peso rose 0.6%, pulling up from over six-month lows

as industrial output beat expectations in August.

Colombia’s peso rallied 0.9% to over three-month

highs. Colombia’s 2021 fiscal deficit may be lower than

previously projected thanks to the recovery of oil prices and

better economic growth, the government said.

Chile’s peso firmed 0.3% after having fallen up to

0.8% during the session. Copper prices dropped on fears that a

global energy crunch could stifle demand, particularly in major

consumer China.

Investors were also anticipating an interest rate decision

from Chile’s central bank on Wednesday, in which it is expected

to hike rates by 100 basis points (bps) to 2.50%, amid a recent

spike in inflation.


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“Given recent macroeconomic and financial developments, the

central bank would benefit from sending an unequivocal signal

that it is determined to stay ahead of the rapidly deteriorating

current and expected inflation dynamics,” Goldman Sachs analysts


The IMF on Tuesday also said emerging markets could face

“Destabilizing capital flows” as cryptocurrencies are used to

circumvent exchange restrictions and capital controls. El

Salvador last month became the first country to adopt bitcoin as

legal tender.

Markets in Brazil were closed.

Key Latin American stock indexes and currencies:

Stock indexes Latest Daily% change

MSCI Emerging Markets 1254.27 -0.9

MSCI LatAm 2221.39 0.12

Mexico IPC 51905.69 0.5

Chile IPSA 4101.34 -1.07

Argentina MerVal 77821.44 0.346

Colombia COLCAP 1391.47 -1.05

Currencies Latest Daily% change

Mexico peso 20.7492 0.51

Chile peso 821.5 0.29

Colombia peso 3718.4 0.86

Peru sol 4.0448 0.38

Argentina peso (interbank) 99.0900 -0.14

(Reporting by Ambar Warrick; editing by Jonathan Oatis and

Cynthia Osterman)



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