Wednesday, February 21

Latam stocks, FX up for fifth day on commodities boost


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Latin American stocks and currencies

firmed against a steadying dollar for a fifth straight day on

Tuesday as sanctions on Russia kept commodity prices lofty,

Although worries about the war in Ukraine encouraged caution.

MSCI’s index for Latin American currencies

firmed 0.5%, while stocks rose 0.8%.

Brazil’s real traded 0.4% higher after having

hit its highest since June 2021 earlier in the session.

The country’s central bank considered a lower rate hike of

at least 75 basis points this month, but decided a

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100-basis-point increase would be “timelier” given inflationary

pressures, minutes from its last policy meeting showed.

“The strength of commodity prices and weakness of imports

has been helping real as has the hawkishness of BCB,” said

Rachel Ziemba, founder of Ziemba insights.

“There are already a lot of hikes, likely too many, priced

into the Brazilian curve, which has brought some solace.”

Brazil’s government foresees a smaller primary budget

deficit this year on the back of higher revenues, especially

from oil royalties, the economy ministry’s bimonthly revenue and

expenditure report indicated on Tuesday.

Mexico’s peso jumped 0.5% against the dollar after a

preliminary estimate showed the country’s economy likely

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expanded by 0.3% in February compared with the previous month.

With Moscow’s invasion of Ukraine in its fourth week,

commodity-exporting countries have benefitted from a global

spike in energy and agricultural commodity prices due to

sanctions on Russia. But countries that depend on imports of oil

and agricultural products have been hard hit.

“The polarization (of EM currencies) promises to increase in

the coming months,” said Alex Kuptsikevich, senior financial

analyst at FxPro.

Resource-rich currencies stand to gain in the current

environment, with the Brazilian real gaining more

than 13% in 2022, and Colombia’s peso and South Africa’s

rand adding nearly 8% each.

On the other hand, the Egyptian pound slid another

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1.5%, after a 14% devaluation on Monday, and the government

announced a budget restructuring in a sign it may be preparing

for a new finance package with the International Monetary Fund

(IMF).

MSCI’s Latam stocks index has surged 20.4%

this year, while its EM counterpart is down 8%.

Chile’s peso edged 0.2% higher. An assembly charged with

drawing up the country’s new constitution extended the deadline

by which the first draft must be ready by three months on

Tuesday.

In Argentina, the central bank will raise the country’s

interest rate on Tuesday, a source told Reuters, although the

size of the hike is still under discussion.

Elsewhere, Hungary’s forint jumped after the

central bank raised the base rate by a bigger-than-expected 100

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basis points to help combat inflation, while the Russian problem

steadied at 104 to the dollar, lacking momentum for

larger moves.

Key Latin American stock indexes and currencies at 1940 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging 1131.97 1.5

Markets

MSCI LatAm 2564.56 0.77

Brazil Bovespa 116907.31 0.65

Mexico IPC 55617.15 0.27

Chile IPSA 4888.23 -2.13

Argentina MerVal 90195.74 0.172

Colombia COLCAP 1551.00 0.73

Currencies Latest Daily %

change

Brazil real 4.9156 0.56

Mexico peso 20.2710 0.48

Chile peso 792.5 0.11

Colombia peso 3756.52 1.05

Peru sol 3.776 0.11

Argentina peso 110.0600 -0.08

(interbank)

Argentina peso 198 2.02

(parallel)

(Reporting by Anisha Sircar, Susan Mathew and Bansari Mayur

Kamdar in Bengaluru; Editing by Edmund Blair and Jonathan Oatis)

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