Brazil’s real leads losses in Latin America
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Brazil’s real lost more than 1% on
Wednesday, leading declines across emerging market currencies as
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falling commodity prices amid recession worries fueled demand
for the U.S. dollar, while the broader Latin American currency
index rose for the month.
Falling iron ore and oil prices also weighed on Latin
America’s resource-heavy assets, taking losses so far this week
for Brazil’s real to 2.7%, in what could be its
worst week since mid-July.
Investors seemed to look past positive data from Brazil that
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showed gross debt fell in July to the lowest level since the
beginning of the COVID-19 pandemic, while separate data for the
three months through July showed the jobless rate in Latin
America’s largest economy hitting the lowest level in almost
seven years.
The Chilean peso retreated further from two-month
highs as copper prices fell on concerns about demand from China
and pressure from a stronger dollar. Further deepening worries,
copper production in Chile, the world’s biggest producer of the
red metal, fell 8.6% on a year-on-year basis in July, data
showed.
The MSCI’s index for Latin American currencies
rose 1.2% in August, boosted by currencies in
Mexico, Peru and Colombia. But sentiment
heading into September has been unencouraging.
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“Central banks are determined to fight inflation,
particularly the Fed, so it is reasonable to wonder how much can
an economy slow down and if prices will indeed go down as the
year closes,” said Juan Perez, foreign exchange trader at Monex
USA.
The Bank of Mexico kept its growth forecast for 2022 gross
domestic product but for 2023, the bank cut its GDP growth view
to between 0.8% and 2.4% from a prior estimate of 1.4% to 3.4%.
Colombia’s dollar-denominated bonds fell, with the May 2049
issue hitting more than one-month lows after
Finance Minister Jose Antonio Ocampo sought to increase the 2023
budget by 10 trillion pesos ($2.28 billion) to fund higher
spending on social programs.
“Colombia credit did underperform following the news, we
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remain marginally constructive with a small overweight since
spreads have already priced-in a great deal of negative news,”
Citigroup research strategists said.
Among stocks, while gains in the shares of state-run oil
company Petrobras lifted Brazil’s main index,
most other regional bourses were trading lower, in line with
Wall Street.
A broader gauge of emerging market stocks pared
some session gains, last up 0.2%, and were on track to eke out
meager gains for the month. It marked its worst session in 1-1/2
months on Monday, thanks to worries about a hawkish U.S. Federal
Reserve.
Key Latin American stock indexes and currencies at 1929 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 993.36 0.06
MSCI LatAm 2125.76 -2.82
Brazil Bovespa 110125.80 -0.28
Mexico IPC 45074.28 -1.85
Chile IPSA 5490.35 -0.83
Argentina MerVal 137035.81 -2.903
Colombia COLCAP 1240.99 -2.31
Currencies Latest Daily %
change
Brazil real 5.2021 -1.75
Mexico peso 20.1333 0.06
Chile peso 895.9 -0.67
Colombia peso 4423 -0.17
Peru sol 3.851 -1.26
Argentina peso (interbank) 138.7200 -0.07
Argentina peso (parallel) 286 1.75
(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru
Additional reporting by Ankika Biswas in Bengaluru
Editing by Paul Simao and Matthew Lewis)
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