Latam FX falls as strong U.S. jobs data revives hawkish Fed fears
Latin American currencies fell on
Friday after a stronger-than-expected reading on U.S. employment
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.
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
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
“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
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
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
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
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.
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)
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