Saturday, November 26

Most EM FX rise against dollar; Lira hovers near record low, rand flat after rate decisions


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Most emerging market currencies

firmed on Thursday as the dollar slipped following less-hawkish

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signals from the US Federal reserve, although Turkey’s lira

hovered near record lows and South Africa’s rand was subdued

after central bank decisions.

Brazil’s real jumped 0.9%. Brazilian Senator Marcelo

Castro told Reuters that the spending cap waiver bill, which

aims to exempt at least 100 billion reais ($19 billion) for

welfare spending next year, must be approved by Dec. 10 so

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Lawmakers can focus on the country’s budget for next year.

Meanwhile, data showed consumer prices hit 0.53% in

mid-November but came in below market forecasts, reinforcing

views that the Brazilian central bank would stick to its current

plans after ending an aggressive tightening cycle.

Brazil stocks gained 2.8%, with shares of

heavyweight Petrobras up 3.6%. President-elect Luiz

Inacio Lula da Silva’s aide said the incoming leftist government

Had no intention of causing a “breakdown” of the state-run oil

giant and that everything would be discussed with markets.

Mexico’s peso slipped 0.1%. Minutes from the Bank of

Mexico’s last policy meeting showed policymakers see price

pressures easing but more rate hikes possible as core inflation

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trends higher.

In South Africa, the rand was flat against the dollar

After the central bank hiked repo rate by 75 basis points to

tame rising inflation, but lowered its growth forecast for the

year impacted by power cuts as coal-fired state power utility

Eskom struggles with power generation.

However, Turkey’s central bank cut its policy rate by 150

basis points to 9% as expected and decided to halt its easing

cycle, in line with President Tayyip Erdogan’s call for a

single-digit rate by year-end despite inflation above 85%.

The lira inched up after hitting a record low of

18.66 to the dollar earlier in the session.

The currency has lost around 28% so far this year, thanks to

unconventional monetary policy which in turn worsened inflation

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and foreign exchange reserves, hammering its appeal to foreign

investors.

Citi strategists said that focus will now be on the 2023

monetary and exchange rate document, set to published in

December, which will be watched for a comprehensive discussion

of additional measures that the central bank will employ.

While emerging market central banks started monetary policy

tightening way ahead of their developed peers like US Fed and

European Central Bank, inflation has consistently exceeded their

target expectation.

Most other currencies rose, lifting MSCI’s index of emerging

market currencies 0.5%, as minutes of the Fed’s meeting earlier

This month showed a “substantial majority” were in favor of

slowing the pace of interest rate hikes.

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Key Latin American stock indexes and currencies:

Stock indexes Latest Daily % change

MSCI Emerging Markets 945.81 1.45

MSCI LatAm 2209.86 2.49

Brazil Bovespa 111924.33 2.83

Mexico IPC 51757.88 -0.45

Chile IPSA 5273.72 0.24

Argentina MerVal 161249.31 1.694

ColombiaCOLCAP 1264.86 -0.09

Currencies Latest Daily % change

Brazil real 5.3098 -0.02

Mexico peso 19.3876 -0.17

Chile peso 910.2 0.63

Colombia peso 4904.7 -0.58

Peru sol 3.8399 0.16

Argentina peso (interbank) 165.1700 -0.20

Argentina peso (parallel) 315 -0.95

(Reporting by Susan Mathew and Devik Jain in Bengaluru; Editing

by Nick Zieminski and Daniel Wallis)

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