Bank of Mexico’s Mejia eyes rate cut, but cautious on inflation
Latam mining stocks rise
Argentina clears over $52 billion in massive bond swap
FX up 0.5%, stocks up 1.3%
Updated at 4pm ET/2000 GMT
By Ankika Biswas
March 13 (Reuters) –Most commodity-linked Latin American currencies gained against a stalling dollar on Wednesday, with the Chilean peso in the lead, boosted by strength in prices of key commodities including copper and crude oil.
Top copper producer Chile’s peso CLP= gained 1.4% to an over one-month high as prices of the red metal touched their highest level in seven months after Chinese smelters, which process half of the world’s mined copper, agreed on a joint production cut.
Chile’s peso has risen for the past two sessions, but remains the worst performer in Latin America so far this year, down over 7% against the dollar year-to-date.
The MSCI index tracking Latam currencies .MILA00000CUS rose 0.5% to an over two-month high, while the regional stocks gauge .MILA00000PUS jumped 1.3%.
The U.S. dollar =USD held steady as traders looked past hotter-than-expected inflation data on Tuesday, maintaining bets on a Federal Reserve interest rate cut in June.
Mexico’s peso MXN=D2 leapt 0.8% to 16.6682 per dollar, its highest level since July as oil prices rose.
Bank of Mexico Deputy Governor Omar Mejia argued in a podcast that it is not premature to consider lowering interest rates, despite cautioning that future cuts should remain restrictive.
Most Latam currencies have struggled to continue their strong performance in 2023, as markets push back the expected timeline for U.S. rate cuts while many of the region’s central banks continue to ease policy.
“While a lot is happening at once in Latin America, the most evident common trend is that the region’s central banks led the easing wave among EM, as the early tightening cycle led to significant disinflation and allowed them to cut rates ahead of the US Fed,” Barclays analysts wrote.
“Now they have to be more careful as disinflation loses steam.”
Economic woes in top commodities consumer China have also weighed on sentiment.
The currency of Peru, another top copper producer, PEN=PE was also up 0.7% to a seven-month high, and Colombia’s peso COP= climbed 0.4%.
Brazil’s real BRL= pared early losses and was about flat at 4.9735per dollar.
Regional mining stocks gained, with Brazil’s Vale VALE3.SA up 0.6% and Mexico’s Grupo Mexico GMEXICOB.MX leaping over 7%.
Argentina’s dollar bonds rallied after the government cleared over $50 billion in upcoming maturities in a massive $65 billion bond swap it issued to push back debts due this year.
The 2046 bond 040114HW3=1M added 2.4 cents, while the local stock index .MERV jumped over 2%.
However, Petrobras PETR4.SA shares dipped 1.2% as the company continued to deal with worries about political risk after government-appointed board members blocked an expected extraordinary dividend payout.
Key Latin American stock indexes and currencies at 2000 GMT:
|
Latest |
Daily % change |
|
|
MSCI Emerging Markets .MSCIEF |
1046.68 |
-0.23 |
|
MSCI LatAm .MILA00000PUS |
2523.26 |
1.3 |
|
Brazil Bovespa .BVSP |
128037.38 |
0.29 |
|
Mexico IPC .MXX |
55874.19 |
1.78 |
|
Chile IPSA .SPIPSA |
6491.11 |
-0.17 |
|
Argentina MerVal .MERV |
1049712.01 |
2.228 |
|
Colombia COLCAP .COLCAP |
1284.15 |
0.43 |
|
Currencies |
Latest |
Daily % change |
|
Brazil real BRBY |
4.9735 |
0.01 |
|
Mexico peso MXN=D2 |
16.6682 |
0.76 |
|
Chile peso CLP=CL |
945.4 |
1.41 |
|
Colombia peso COP= |
3901.13 |
0.43 |
|
Peru sol PEN=PE |
3.6618 |
0.66 |
|
Argentina peso (interbank) ARS=RASL |
849.5000 |
-0.06 |
|
Argentina peso (parallel) ARSB= |
1015 |
0.49 |
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru
Editing by Peter Graff and Alistair Bell