Brazil’s real leads gains as central bank keeps hawkish tone
Brazil’s real spearheaded the gains among its Latin American
peers on Thursday, after its central bank said it would maintain
tight monetary policy till inflation came within sight of its
The real snapped a three-session losing streak and
gained nearly 1.6% after the central bank held the key interest
rate steady at 13.75%, keeping it unchanged for a second month
in row as it paused its aggressive tightening cycle after 12
consecutive increases that lifted rates from a 2.0% record low
in March 2021.
Brazil heads into what is turning out to be a close
presidential election run-off between leftist former President
and front-runner Luiz Inacio Lula da Silva and far-right
incumbent Jair Bolsonaro on Sunday, with the former maintaining
The real is among the best performing emerging market
currencies this year, up over 5%.
Analysts at UBS Global Wealth Management maintained a
constructive view on the Brazilian real on the back of a
super-orthodox central bank and external accounts in good
Further, Brazil’s Bovespa index
snapped a three-day losing streak
and advanced 1.3% with financial agents making the last
adjustments with an eye on the second round of the election on
Sunday, while analyzing a slew of corporate results.
The wealth manager sees Brazilian equities retaining
their outperformance against other emerging market peers, driven
by high commodity prices, relatively low vulnerability to
tighter global liquidity, attractive valuations and superior
Brazil’s central government posted a
better-than-expected primary budget surplus in September
, Treasury data showed, boosted by dividends from the
state-owned oil company Petrobras, which saw its
shares rise 0.8%, and higher tax revenues.
Other emerging market currencies rose
against the dollar, with Mexico’s peso rising 0.5% and
Colombia’s peso jumping 1.3% to a one-week high.
With rising recession fears, investors tend to prefer
currencies that have something physical to hold on to, which
makes Latin American currencies attractive as the economies have
physical commodities that can sustain economic activity, trade
and food, said Juan Perez, senior currency trader at Monex USA.
Central European currencies were muted to lower after the
European Central Bank raised the benchmark interest rate by 75
basis points. But the euro fell as the analysts noted the
bank sounded less hawkish than expected and struck a dour tone
on economic growth in the euro area.
Argentina’s peso slipped after ratings agency Fitch
on Wednesday downgraded Argentina’s long-term sovereign credit
rating by a notch to ‘CCC-‘ from ‘CCC’, citing deep
macroeconomic imbalances and rising risks over the country’s
ability to meet future debt repayments.
Egypt’s pound plunged 15% to a record low against the
dollar as authorities announced a $3 billion International
Monetary Fund deal with a commitment to a “durably flexible
exchange rate regime”.
Key Latin American stock indexes and currencies 1928 GMT:
Stock indexes Latest Daily %
MSCI Emerging Markets 859.24 0.87
MSCI LatAm 2214.23 1.16
Brazil Bovespa 114368.05 1.42
Mexico IPC 48934.00 -0.8
Chile IPSA 5188.40 0.71
Argentina MerVal 148050.09 2.083
Colombia COLCAP 1192.18 -0.82
Currencies Latest Daily %
Brazil real 5.2984 1.53
Mexico peso 19.8504 0.38
Chile peso 942.4 0.91
Colombia peso 4809.78 1.28
Peru sol 3.9627 0.18
Argentina peso (interbank) 155.6900 -0.19
Argentina peso (parallel) 287 1.74
(Reporting by Susan Mathew and Ankika Biswas in Bengaluru;
Editing by Bernadette Baum and Andrea Ricci)
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