TD – EMERGING MARKETS-Colombian peso surges in catch-up trade, Latam FX muted
By Ambar Warrick
May 18 (Reuters) – Colombia’s peso rose in catch-up trade on Tuesday as dovish signals from the U.S. Federal Reserve buoyed risk assets, while Chile’s peso recovered from its worst day in more than four months.
Colombia’s peso COP= rose 0.8% to a near one-month high after a long weekend, supported by data last week that showed the Colombian economy grew by more than expected in the first quarter.
But anti-government protests, which began in late-April against a now withdrawn tax reform, have dampened the country’s economic outlook and had sent the peso to a six-month low recently.
Gains in oil prices also supported the peso, as investors bet on a boost to crude demand from Europe and the United States reopening their economies. O/R
“The energy complex is shrugging off angst surrounding COVID-19 flare-ups in Asia, as the global reopening is set to translate into an incredible demand story this summer,” analysts at TD Securities wrote in a note.
Broader sentiment was widely risk-on, as comments from the Fed on Monday suggested that U.S. interest rates would be static until at least next year. This weighed on the dollar and Treasury yields, helping riskier assets. USD/
Positive economic growth data also helped sentiment, while rising inflation expectations this year saw many emerging market central banks either beginning to tighten policy, or signaling that they will.
Brazil’s real BRBY, which has benefited from a recent tightening spree by the country’s central bank, was muted on Tuesday, after the government raised its inflation and economic growth outlook for 2021.
Chile’s peso CLP= rose slightly after marking its worst day in more than four months on Monday.
Chilean stocks .SPIPSA also recovered from their worst day in more than a year, after the country’s ruling center-right coalition failed to secure a critical one-third of seats in the body that will draft a new constitution, increasing the chances of more radical, investment-unfriendly proposals.
Data showed the Chilean economy grew lesser-than-expected in the first quarter.
Mexico’s peso MXN= dropped 0.3% as talks began on Monday over the United States-Mexico-Canada Agreement (USMCA) Free Trade Commission, which centers on the trade accord that last year replaced the North American Free Trade Agreement.
Key Latin American stock indexes and currencies:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
(Reporting by Ambar Warrick in Bengaluru Editing by Alistair Bell)
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