By Ankika Biswas
March 13 (Reuters) – Currencies of most resource-endowed Latin American countries gained against a stalling dollar on Wednesday, with the Chilean peso in the lead, boosted by strength in prices of key commodities such as copper and crude oil.
The MSCI index tracking Latam currencies .MILA00000CUS climbed 0.3% by 10:20 a.m. ET (1420 GMT) to an almost two-month high, while the stocks gauge .MILA00000PUS rose 0.6%.
The U.S. dollar=USD held steady as traders looked past hotter-than-expected inflation data and still expected a Federal Reserve interest rate cut in June.
Top copper producer Chile’s peso CLP= gained 1% 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.
The currency of Peru, another top copper producer, PEN=PE was also up 0.8% to a seven-month high.
The peso currencies of major oil exporters Mexico MXN=D2 and Colombia COP= also climbed 0.3% and 0.2%, respectively, as the commodity’s prices spiked 2%, supported by potential supply disruption after Ukrainian attacks on Russian refineries, signs of strong demand and hopes that the Federal Reserve might start cutting interest rates soon despite sticky U.S. inflation.
On the flip side, major iron ore producer and exporter Brazil’s real BRL= slipped 0.2% as the mineral’s prices declined to over six-month lows on fears of a reduction in demand in top consumer China.
On Tuesday, Brazil’s Vice President Geraldo Alckmin said in an interview that the dollar trading between 4.9 reais ($0.9860) and 5.0 reais is competitive and helps the country’s exports.
“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.”
Most Latam currencies have failed 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 and economic woes in top commodities consumer China weigh on sentiment. Chile’s peso is the worst performer within the Latam space so far this year.
Bank of Mexico Deputy Governor Omar Mejia argued in a podcast that it is to consider lowering interest rates, though he cautioned that any future cuts should remain restrictive.
Meanwhile, Argentina’s government cleared some 42.6 trillion Argentine pesos ($52.5 billion) in a massive $65 billion bond swap it issued to push back debts due this year, its economy ministry said on Tuesday.
Key Latin American stock indexes and currencies:
Stock indexes
Latest
Daily % change
MSCI Emerging Markets .MSCIEF
1046.16
-0.28
MSCI LatAm .MILA00000PUS
2506.58
0.63
Brazil Bovespa .BVSP
128205.10
0.42
Mexico IPC .MXX
54985.31
0.16
Chile IPSA .SPIPSA
6517.64
0.24
Argentina MerVal .MERV
0.00
Colombia COLCAP .COLCAP
1284.51
0.46
Currencies
Latest
Daily % change
Brazil real BRBY
4.9813
-0.15
Mexico peso MXN=D2
16.7415
0.32
Chile peso CLP=CL
949.4
0.98
Colombia peso COP=
3911.3
0.17
Peru sol PEN=PE
3.6569
0.79
Argentina peso (interbank) ARS=RASL
849.5000
-0.06
Argentina peso (parallel) ARSB=
1015
0.49
(Reporting by Ankika Biswas in Bengaluru Editing by Peter Graff)
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