Home Forex Latam FX jumps as dollar weakens, China stimulus lifts commodity prices

Latam FX jumps as dollar weakens, China stimulus lifts commodity prices

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EMERGING MARKETS-Latam FX jumps as dollar weakens, China stimulus lifts commodity prices

Mexico annual headline inflation persisted in upward trend

Brazil’s real leads gains

Latam FX up 1.0%, stocks add 1.3%

By Shashwat Chauhan

Jan 24 (Reuters)Currencies and stocks of most resource-rich Latin American countries advanced on Wednesday, as commodity prices got a boost after China announced fresh stimulus plans, while a softer U.S. dollar also acted as a catalyst for gains.

MSCI’s index for Latin American currencies .MILA00000CUS gained 1.0% as of 1501 GMT, while stocks .MILA00000PUS advanced 1.3%.

Prices of most base metals and iron ore futures jumped after top commodities consumer China’s central bank announced a deep cut to bank reserves, in a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.

Iron ore exporter Brazil’s real BRL= led gains, rising 0.6% against the dollar, reaching a near one-week high.

Stocks in Brazil .BVSP also gained 0.5%, helped by advancing materials and energy shares.

The Mexican peso MXN= gained 0.6% against the dollar after data showed headline inflation in the country persisted in its upward trend for the fifth half-month in a row, coming in above forecasts.

“All of this gives Banxico a difficult decision to make when the board next meets on 8th February,” said Jason Tuvey, deputy chief emerging markets economist at Capital Economics.

“Officials have hinted that the start of an easing cycle is close … but with the headline (interest) rate having risen for the past two months and wage growth still running at very high rates, it’s not clear if officials will feel comfortable that price pressures have truly been tamed.”

Rising oil prices helped crude exporter Colombia’s peso COP= rise 0.5%. O/R

Currency of the world’s biggest copper producer Chile CLP= rose 0.1% against the dollar as prices of the red metal touched three-week highs, while the currency of the second biggest exporter, the Peruvian sol PEN=PE edged 0.1% higher.MET/L

Aiding gains, the dollar index =USD dropped 0.4%, clocking its first decline in three sessions. FRX/

Equities in Chile .SPIPSA and Mexico .MXX also had a bright start to the session, rising 1.2% and 0.3%, respectively, while Colombian shares .COLCAP added 0.2%.

Meanwhile in Argentina, the country’s largest union is set to hold a 12-hour strike on Wednesday and a major demonstration in the heart of Buenos Aires against tough economic austerity measures and reforms by new libertarian President Javier Milei.

Elsewhere in emerging markets, Nigeria’s central bank Governor Olayemi Cardoso said the bank aims for inflation to fall to about 21% and will work to strengthen the country’s undervalued naira currency.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

983.54

1.4

MSCI LatAm .MILA00000PUS

2529.00

1.33

Brazil Bovespa .BVSP

128835.59

0.45

Mexico IPC .MXX

55692.09

0.34

Chile IPSA .SPIPSA

6035.73

1.19

Argentina MerVal .MERV

1226782.27

1.684

Colombia COLCAP .COLCAP

1265.67

0.2

Currencies

Latest

Daily % change

Brazil real BRBY

4.9202

0.70

Mexico peso MXN=D2

17.1922

0.63

Chile peso CLP=CL

909.4

0.08

Colombia peso COP=

3927.3

0.54

Peru sol PEN=PE

3.7509

0.13

Argentina peso (interbank) ARS=RASL

822.4000

-0.05

Argentina peso (parallel) ARSB=

1235

1.62

Reporting by Shashwat Chauhan in Bengaluru; editing by Jonathan Oatis

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