Latam stocks, FX slide on U.S. interest rate hike fears


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Most Latin American currencies extended

losses to a third straight day on Thursday, as expectations of a

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sharp rate hike from the U.S. Federal Reserve boosted the dollar

and raised growth slowdown worries.

Brazil’s real led declines among currencies,

falling 1.2%, even as its economic ministry upgraded its

forecast for economic growth this year to 2.7% from 2%, and as

data showed economic activity rose much higher than expected in

July.

“We expect a recession in the euro zone and low growth of

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investment in the U.S. That will affect Latin America, which is

strongly trade related to the U.S.,” said Manfred Stamer, senior

economist at Allianz Trade. “But we do not see major Latam

countries going into recession.”

Latin America’s largest economy saw seasonally-adjusted

1.17% growth in economic activity from June, compared with a

forecast of 0.3% in a Reuters poll of economists.

The real has been volatile ahead of October elections, but

has outperformed all of its regional peers so far this year.

Also weighing on resource-rich Latam assets on Thursday was

a sharp drop in oil prices, which slumped on concerns about the

impact to demand during a potential economic growth slowdown.

Prices of copper and most other metals also slipped on

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slowdown fears. The Chilean peso and the Mexican peso

fell about 0.5% against the dollar, while the Peruvian

sol was down nearly 1%.

Peru’s economic growth rate slowed sharply in July,

expanding only 1.41% – the slowest pace since the country lifted

pandemic-related restrictions last year – amid a slowdown in its

critically important mining sector, data showed on Thursday.

The dollar found support as data showing rising inflation

and signs of strength in the economy firmed the case for the Fed

this week to stay hawkish and deliver its third 75 basis points

interest rate hike.

Latam stocks fell 1.5% to one-week lows,

also on track for a third day of losses.

Higher commodity prices supported Latam currencies during

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the early part of the year, but investors have been moving

toward safer assets such as the dollar on bets of an

increasingly hawkish Fed and fears of a recession.

Meanwhile, Argentina’s monthly inflation blew past forecasts

at 7% in August and soared to nearly 80% from a year earlier, a

government agency reported on Wednesday.

Key Latin American stock indexes and currencies at 1901 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 957.24 -0.55

MSCI LatAm 2137.59 -1.58

Brazil Bovespa 110015.36 -0.48

Mexico IPC 46774.30 0.06

Chile IPSA 5522.92 -1.54

Argentina MerVal 144895.56 -1.264

Colombia COLCAP 1210.15 -0.71

Currencies Latest Daily %

change

Brazil real 5.2385 -1.20

Mexico peso 20.0791 -0.68

Chile peso 927.5 -0.82

Colombia peso 4412.8 -0.62

Peru sol 3.8767 -1.15

Argentina peso 143.1800 -0.21

(interbank)

(Reporting by Amruta Khandekar, Anisha Sircar and Susan Mathew

in Bengaluru; Editing by Nick Zieminski and Bill Berkrot)

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