TD – EMERGING MARKETS-Mexican peso up after c.bank decision, Latam FX steady
By Shreyashi Sanyal and Shashank Nayar
May 13 (Reuters) – Mexico’s peso rose on Thursday after the country’s central bank held its key interest rate steady, while most other currencies in Latin America rebounded from steep losses in the prior session.
The peso MXN= rose 1.2% as the Mexican central bank, locally known as Banxico kept the rate unchanged at 4.0%, as expected, after cutting by 25 basis points in February, but its five-member board reflected growing concerns about the path of inflation.
“Having closed the door to further easing at the last meeting, today’s decision was never really in doubt,” said William Jackson, chief emerging markets economist at Capital Economics.
“Investors, in contrast, are pricing in the start of a tightening cycle by the end of the year.”
Analysts at TD Securities say the communication from Banxico follows on from the March meeting’s incremental “hawkishness”.
Brazil’s real BRBY, BRL= edged higher, as economic activity in March recorded a smaller decline than economists had expected, implying that first quarter economic growth rose 2.3% despite a second wave of COVID-19 infections.
Following the upbeat data, economists at Barclays, Goldman Sachs and Credit Suisse were among those who raised their gross domestic product growth forecasts for 2021 to at least 4% for Brazil.
Citi also increased its holding of Brazil U.S. dollar sovereign bonds to an overweight position, citing a window of opportunity before elections in October 2022.
The real and most other Latam currencies fell on Wednesday after a jump in U.S. inflation raised concerns the Federal Reserve would bring forward its timeline for tightening policy.
But a sluggish labor market recovery has seen the Fed exude largely dovish signals, even as data showed fewer Americans filed new claims for unemployment benefits last week, beating economist forecasts.
The Chilean peso CLP= held steady, while the Peruvian sol PEN= gained 1.7% ahead of their respective central bank meetings later in the day.
The Argentine peso ARS= was flat as inflation likely eased slightly to around 3.8% in April, a Reuters poll of analysts showed, coming off a peak the month earlier that was its highest since 2019, as the South American country battles to rein in rising prices..
Colombia’s peso COP= gained 0.8%, after marking its worst day in more than a week as rising social unrest due to anti-government protests sullied the country’s economic outlook.
Key Latin American stock indexes and currencies at 2015 GMT:
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
Argentina peso (parallel) ARSB=
(Reporting by Shreyashi Sanyal and Shashank Nayar in Bengaluru; editing by Barbara Lewis and Diane Craft)
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