Mexican peso pares gains after rate hike

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Mexico’s peso pared gains on Thursday

after the central bank announced an interest rate hike that met

expectations, while other Latin American currencies and emerging

market shares firmed on optimism for milder U.S. inflation.

The Bank of Mexico hiked the benchmark interest rate by 75

basis points to a record 8.5%, in line with estimates in a

Reuters poll, and mirroring the U.S. Federal Reserve’s most

recent decision.

“Banxico’s board members (especially those seen as usually

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dovish) sent a clear message by unanimously hiking. … This

underscores that the bank will maintain its hawkish tone in

upcoming decisions,” said Wilson Ferrarezi, economist at TS

Lombard.

“However, it also left the door open for another 75 bps or

50 bps hike in September, underscoring it’ll remain in

data-dependent mode. This will largely depend on the August CPI

(Consumer Price Index) figures and the Fed’s decision in

September.”

Mexico’s peso pared losses slightly, rising 0.3% and

staying close to six-week highs hit last session.

Argentina’s tightly controlled peso fell 0.2%. The

country’s central bank raised the benchmark ‘Leliq’ rate 950

basis points to 69.50%.

Peru’s central bank is also seen hiking its rates for the

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13th consecutive time, to 6.5%. Peru’s annual inflation rate

stood at 8.74% on a year-on-year basis in July, edging lower

from its highest in a quarter of a century.

Several emerging market central banks have tightened

monetary policy in the face of surging prices as economies

recover from the COVID-19 pandemic and Russia-Ukraine war.

Some relief came on Wednesday when data showed U.S.

inflation remained unchanged in July, prompting markets to scale

back expectations of a third 75 bps hike in September.

Brazil’s real, which has outperformed this year due

to the country’s aggressive tightening cycle, fell 1.4%.

The real faces volatility as October presidential elections

approach. In his re-election bid, President Jair Bolsonaro said

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he plans to simplify the tax regime, lower corporate taxes and

reduce import tariffs to foster trade.

State-run oil company Petrobras said it would

lower refinery gate diesel prices by 4% starting Friday, the

second cut in a week, which drew praise from Bolsonaro.

Petrobras shares fell 1%.

Colombia is expected to grow 11.25% in the second quarter

versus a year ago, according to a Reuters poll.

Key Latin American stock indexes and currencies at 1923 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 1013.20 1.6

MSCI LatAm 2241.82 -1.3

Brazil Bovespa 109898.19 -0.31

Mexico IPC 48158.25 0.73

Chile IPSA 5304.87 0.61

Argentina MerVal 123633.03 1.231

Colombia COLCAP 1321.89 0.59

Currencies Latest Daily % change

Brazil real 5.1605 -1.48

Mexico peso 19.9665 0.25

Chile peso 883.9 0.36

Colombia peso 4225.13 1.02

Peru sol 3.8627 0.41

Argentina peso 134.2500 -0.18

(interbank)

Argentina peso 292 1.03

(parallel)

(Reporting by Susan Mathew and Anisha Sircar in Bengaluru;

Editing by Susan Fenton and Richard Chang)