Latam FX falls as strong U.S. jobs data revives hawkish Fed fears

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Latin American currencies fell on

Friday after a stronger-than-expected reading on U.S. employment

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raised concerns about a hawkish Federal Reserve, while South

Africa’s rand rebounded a day after rumors of President Cyril

Ramaphosa resigning shook markets.

Mexico’s peso dipped 1.5% against the dollar, leading

declines among central and south American currencies as prices

of its top export oil dropped ahead of an OPEC+ meeting on

Sunday and EU ban on Russian crude on Monday.

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J.P. Morgan said it

does not expect a recession in Mexico

in 2023 as resilient domestic demand should help offset the

negative impact from a “mild U.S. recession” until the end of

next year.

Fears of a U.S. slowdown has picked up pace recently due

to aggressive monetary policy tightening adopted by the Fed to

tame inflation, which recently has showed signs of moderating.

Data earlier in the day showed that U.S. employers added

more jobs than expected in November and raised wages,

potentially giving the U.S. central bank more reason to hike

interest rates.

“Today’s wage growth strength kind of runs in the face of

some of the recent improving inflation data that we have been

seeing. This doesn’t make a trend, but it clearly has caught the

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market and probably the Fed’s attention,” said Ryan Detrick,

chief markets strategist at the Carson Group.

“The Fed could be a tad more aggressive with their rate

hikes in the near term.”

The Chilean peso shed 0.4%, while Brazil’s real

was down 0.6%.

Brazil’s President-elect Luiz Inacio Lula da Silva’s

aide said on Friday the transitional government hopes to obtain

Congress approval for a minimum

150 billion reais ($29 billion) waiver

from the constitutional spending cap to meet campaign

promises.

Concerns about the waiver proposal had rattled Brazilian

assets last month, with economists warning it could push public

debt to record levels and force the central bank to resume

interest hikes after it paused an aggressive monetary cycle to

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tame inflation.

Latin American currencies were set to end

their second straight week higher, while the region’s stocks

index was set to snap a three-week losing

streak.

Optimism over a downshift in aggressive monetary policy by

the U.S. Federal Reserve and that China will gradually reopen

its economy have bode well for riskier emerging market assets.

South Africa’s rand rose 1.1%, after falling some 4%

in the last two days. Ruling party officials failed to reach a

conclusion over whether Ramaphosa should stay in power after an

inquiry found evidence of misconduct.

The Peruvian sol slipped 0.2% after its Congress

approved a motion initiated by opposition lawmakers to start

impeachment proceedings against President Pedro Castillo.

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Key Latin American stock indexes and currencies at 2010 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 974.66 -0.37

MSCI LatAm 2230.55 -0.26

Brazil Bovespa 112224.76 1.17

Mexico IPC 51257.91 -0.39

Chile IPSA 5290.76 0.3

Argentina MerVal 169600.61 -0.588

Colombia COLCAP 1239.28 0.31

Currencies Latest Daily % change

Brazil real 5.2165 -0.07

Mexico peso 19.4232 -1.55

Chile peso 881.9 -0.32

Colombia peso 4768.6 -0.19

Peru sol 3.8259 -0.25

Argentina peso (interbank) 168.0800 -0.20

Argentina peso (parallel) 308 1.62

(Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru;

editing by Philippa Fletcher and Nick Zieminski)