EMERGING MARKETS – Mexican peso up after searing inflation data, rest of Latam falls


Band Shreyashi Sanyal and Anisha Sircar

April 7 (Reuters)The Mexican peso rose on Thursday on bets for further interest rate hikes after data showed annual inflation hit multi-decade highs, while other major Latin American currencies fell against a stronger dollar.

The peso MXN= firmed 0.5%, an outlier among developing country peers on the day, with data showing Mexican consumer prices rose 7.45% in the year to March, to reach their highest level since the beginning of 2001 and double the central bank’s target.

The figure suggested further rate hikes by Mexico’s central bank were likely and were also above the median forecast of 7.36% by analysts polled by Reuters.

Most emerging market (EM) currencies were down, with even the MSCI index for Latin American units .MILA00000CUS lose 0.9%. The dollar =USD hit a nearly two-year high before easing off. /FRX

Resource-rich Latin America has outperformed other markets in recent weeks despite mounting geopolitical risks, due to soaring commodity prices and monetary tightening cycles, but the recovery may be short-lived. according to analysts.

“Most emerging markets have been quite resilient in recent months as strong external positions and proactive interest rate hikes have shielded global events,” said David Rees, senior economist at Schroders.

“That said, the tightening of global financial conditions resulting from the tightening of the US Federal Reserve and lower risk appetite due to the situation in Ukraine is likely to have a negative impact on the ability of emerging markets to access external funding and meet their outstanding obligations.”

Minutes from the Fed’s March meeting on Wednesday showed “many” policymakers were ready to raise interest rates in 50 basis point increments in the coming months, supporting the greenback.

The true of Brazil BRL=, BRBY fell 0.6%, down for the third consecutive day.

A Reuters poll showed the real will continue to trade near pre-pandemic levels in the coming weeks, while riding a wave of positive sentiment that runs counter to deteriorating economic conditions.

Meanwhile, Chilean President Gabriel Boric announced a $3.7 billion economic stimulus package that includes a minimum wage hike and funding for sectors still battling the effects of the pandemic.

The Chilean peso CLP= lost 0.7%, while Peruvian soil PEN= fell 0.5%. Latin America Scholarships .MILA00000PUS were down 0.2%, while broader emerging stocks .MSCIEF down 1.4%.

Elsewhere, Pakistan’s central bank raised its benchmark rate by 250 basis points to 12.25% at an emergency meeting on Thursday, the biggest hike in years.

Pakistan’s Supreme Court has ruled Prime Minister Imran Khan’s decision to dissolve parliament unconstitutional and ordered lawmakers to revert, a move that could spell the end of his tenure as early as Friday.

Latin American Stock Indices and Currencies at 1917GMT:

Stock indices

Last

% daily change

MSCI Emerging Markets .MSCIEF

1127.07

-1.35

MSCI Latam .MILA00000PUS

2659.65

-0.13

BrazilBovespa .BVSP

118913.25

0.58

Mexico IPC .MXX

55442.41

0.01

Chile IPSA .SPIPSA

4984.07

0.24

Argentina MerVal .MERV

91113.00

0.154

Colombia COLCAP .COLCAP

1621.16

-0.3

Currencies

Last

% daily change

Brazilian real BRBY

4.7423

-0.59

mexican peso MXN=D2

20.0745

0.43

chilean peso CLP=CL

805.7

-0.76

Colombian peso COP=

3764.27

-0.46

Soil of Peru PEN=PE

3.696

0.00

Argentinian peso (interbank) ARS=RASL

111.9700

-0.12

Argentinian peso (parallel) ARSB=

193

1.55

(Reporting by Shreyashi Sanyal, Anisha Sircar and Devik Jain in Bengaluru; Editing by Andrea Ricci and Grant McCool)

(([email protected]; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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