Brazil’s real swings; Other Latam FX slip as hawkish Fed comment lifts dollar
Brazil’s real was volatile on Monday
after a bruising week, while most other Latin American
currencies slipped after hawkish warnings from the U.S. Federal
Reserve and concern about rising COVID cases in China.
Brazil’s real, which rose as much as 1.3% during the
session, was last down 0.3%.
Data on Monday showed economic activity in Brazil resumed
expansion in September, though less than expected. The data
suggested Brazil’s economy would still end the quarter in
Lingering concerns over President-elect Luiz Inacio Lula da
Silva’s plan to seek a waiver on the government’s spending cap,
as well as uncertainty around his cabinet picks, saw the
currency lose 5% last week.
“Headlines increasingly point to changes that would expand
the 2023 deficit by a wider margin than we expect, around BRL
175 billion,” economists at J.P.Morgan said.
Fiscal and political decisions in the coming weeks and the
decline in core inflation will define the timing and extent of
the central bank’s expected easing cycle, they said.
Globally, sentiment was subdued after Fed Governor
Christopher Waller said any slowing in pace of monetary policy
tightening should not be construed as “softening” in the Fed’s
fight against inflation, tempering expectations of a smaller
hike next month.
But Wall Street banks are raising their outlook for emerging
markets’ hard-currency bonds on the basis a slowdown in U.S.
rate hikes could provide some relief for the asset class.
The dollar rose, weighing on risk appetite.
Mexico’s peso was flat after marking its fourth
straight week of gains on Friday.
Tens of thousands took to the streets in Mexico on Sunday to
protest President Andres Manuel Lopez Obrador’s plan to overhaul
the country’s electoral commission INE that they fear would
concentrate power in the hands of the government.
Chile’s peso fell 1.5%, retreating from nine-week
highs. While copper prices rose, COVID-19 cases grew in China,
raising the possibility curbs that were eased last week in the
world’s biggest commodity consumer could be reimposed.
Elsewhere, South Africa’s rand slipped 0.5% after
jumping about 6% over the last four weeks, with eyes on a review
of the country’s sovereign credit rating from S&P Global and
Moody’s on Friday.
Key Latin American stock indexes and currencies:
Stock indexes Latest Daily %
MSCI Emerging Markets 939.21 0.37
MSCI LatAm 2228.38 -1.13
Brazil Bovespa 112273.90 0.02
Mexico IPC 51966.40 0.01
Chile IPSA 5319.79 -0.58
Argentina MerVal 150997.03 0.388
Colombia COLCAP 1266.56 -0.92
Currencies Latest Daily %
Brazil real 5.3435 -0.30
Mexico peso 19.4880 0.04
Chile peso 904.4 -1.22
Colombia peso 4804.5 -0.07
Peru sol 3.8598 -0.44
Argentina peso 161.7500 -0.62
(Reporting by Susan Mathew in Bengaluru; editing by Barbara
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