Monday, May 29

Mexico’s peso leads declines among Latam FX, Turkish assets fall


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Most Latin American currencies fell

against a firm dollar on wednesday with the mexican peso

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spearheading declines, while Turkish assets fell for a third

straight day following the presidential election outcome.

MSCI’s index for Latin American currencies

was down 0.8% at 1416 GMT, as the dollar strengthened amid

Ongoing talks to raise the US debt ceiling.

The Mexican peso fell 0.7%, slipping further away from

seven-year highs hit earlier this week, a day ahead of a

monetary policy decision where the central bank is expected to

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keep interest rates unchanged.

The Brazilian real was down 0.2% against the

dollar, with market focus on a new fuel pricing policy announced

by Brazilian state oil company Petrobras on Tuesday.

“The idea is to anchor inflation and I wonder if that will

mean indeed that the central bank (of Brazil) will not consider

hiking interest rates after refusing to in their last meeting,”

said Juan Perez, director of trading at Monex USA in Washington

Meanwhile, analysts at Moody’s Investors Service said the

policy shift was “credit negative” for Petrobras and “could lead

to losses if Petrobras does not pass through international oil

price volatility to domestic fuel prices.”

Data showed Brazil’s retail sales rose 0.8%, beating market

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estimates in March.

Brazil’s Finance Minister Fernando Haddad emphasized on

Wednesday that there is room for interest rate cuts in the

country, contrasting with the central bank chief’s

acknowledgment of ongoing challenges in achieving disinflation.

The Chilean peso rose 0.2%, while the Colombian peso

edged 0.3% lower.

The Peruvian sol was up 0.6% against the greenback.

Also souring market sentiment on Wednesday were concerns

about China’s slow post-COVID recovery, with data on home prices

adding to evidence of weak consumer demand.

Still, Latin American currencies and stocks have

Outperformed broader emerging markets in 2023, hitting

multi-year highs several times in recent months.

“Latam is showing that GDP figures are resilient to the

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post-pandemic and post-war pains that have affected others

regions, such as Europe far more severely. In the minds of

traders, there is evidence of ongoing growth that makes Latam

more attractive as a region,” said Perez.

The rout in Turkey’s bank stocks and dollar denominated

bonds extended into the third day, after the main opposition

party said it had filed complaints over suspected irregularities

at thousands of ballot boxes in Sunday’s landmark elections – in

which President Tayyip Erdogan performed better than expected.

Elsewhere, Ecuador’s President Guillermo Lasso dissolved the

National Assembly, bringing forward legal and presidential

elections, a day after he presented his defense in an

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impeachment process against him.

The International Monetary Fund’s First Deputy Managing

Director Gita Gopinath said she sees sizeable risks that

inflation will remain high or accelerate in many emerging

markets and urged central banks to keep monetary policies tight.

Key Latin American stock indexes and currencies at 1416 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 975.50 -0.38

MSCI LatAm 2311.79 -0.31

Brazil Bovespa 109136.98 0.87

Mexico IPC 55214.00 0.06

Chile IPSA 5596.96 -0.39

Argentina MerVal 0.00 0

ColombiaCOLCAP 1145.02 0.65

Currencies Latest Daily % change

Brazil real 4.9510 -0.20

Mexico peso 17.6330 -0.82

Chile peso 798.3 -0.06

Colombia peso 4550.94 -0.34

Peru sol 3.6848 0.67

Argentina peso 231.6000 -0.19

(interbank)

Argentina peso 485 0.62

(parallel)

(Reporting by Amruta Khandekar

Editing by Christina Fincher)

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