Currencies in resource-rich Latin America
fell on Monday as the dollar rose ahead of a likely US
interest rate hike this week, while weakness in commodity prices
and disappointing economic activity data kept Brazil’s stock
market under pressure.
The dollar resumed its march towards 20-year highs
ahead of the US Federal Reserve’s meeting this week. Investors
are expecting the US central bank to hike rates by 50 basis
points when it meets on Tuesday and Wednesday.
Commodity currencies of Brazil and Chile
fell 1% and 0.7%, respectively.
“To be blunt, it’s all about the Fed on Wednesday and the
rhetoric surrounding that and then the Fed speakers at the back
end of the week,” said Christian Lawrence, senior cross-asset
strategist at Rabobank.
“The region (Latin America) as a whole is going to be more
or less trading on the back of dollar dynamics rather than any
Brazil’s Bovespa index fell to its lowest level in
over three months, last down 1.6%, as oil prices fell on
concerns over weak economic growth in China, the world’s top oil
importer, overshadowing fears that supply might be crimped by a
potential European Union ban on Russian crude.
Heavyweights Vale SA and Petroleo Brasileiro SA
fell over 2% each.
Data showed economic activity in Brazil resumed growth in
February, but at a slower than expected pace, while separately,
Chile’s economic activity data beat market expectations
Bolstered by an increase in service activity.
Peru’s Sol edged 0.2% lower. Data showed annual
inflation rate in the copper-producing Andean nation hit 7.96%
in April, its highest level in 24 years, as Peru grapped with
protests over rising food and energy costs linked to a
commodities price spike since Russia’s invasion of Ukraine.
On a positive note, the European Union and the South
American trade bloc Mercosur could by year’s end resolve
environmental concerns that are holding up a free trade
agreement, EU Commissioner Virginijus Sinkevicius told Reuters.
The Mercosur bloc includes Brazil, Argentina, Paraguay and
Elsewhere, the dollar gained half a percent on the Chinese
yuan in offshore markets, reaching 6.6895, just below
its strongest since late 2020.
China’s factory activity contracted at a steeper pace in
April as widespread COVID-19 lockdowns halted industrial
production and disrupted supply chains, raising fears of a sharp
economic slowdown in the second quarter that will weigh on
Key Latin American stock indexes and currencies at 1516 GMT:
Stock indexes Latest Daily %
MSCI Emerging Markets 1070.37 -0.54
MSCI LatAm 2259.43 -2.35
Brazil Bovespa 106112.56 -1.63
Mexico IPC 51719.67 0.59
Chile IPSA 4737.52 -0.86
Argentina MerVal 87488.86 -0.864
Colombia COLCAP 1571.31 0.57
Currencies Latest Daily %
Brazil real 5.0393 -1.92
Mexico peso 20.4150 -0.02
Chile peso 861.2 -1.39
Colombia peso 3996.6-1.14
Peru sol 3.851 -0.39
Argentina peso (interbank) 115.7500 -0.36
Argentina peso (parallel) 198 1.26
(Reporting by Bansari Mayur Kamdar in Bengaluru
Editing by Alistair Bell)