Mexican peso worst-hit as Latam currencies lose ground
Survey shows Mexico likely to cut interest rate to 10.50%
Brazil's inflation undershoots all estimates
Chile expected to cut rate by 25 bps in October- poll
Latam FX down 0.2%, stocks down 0.2%
By Ankika Biswas
Sept 25 (Reuters) -Most Latin American stocks and currencies retreated on Wednesday, a day after logging strong gains on the back of a spike in commodity prices, with the Mexican peso the worst performer in countdown to this week's interest rates decision.
Mexico's peso MXN= dropped 0.7% against the dollar, leading the MSCI index for Latam currencies .MILA00000CUS 0.2% down after a 1% jump on Tuesday following China's stimulus measures that sparked a rally in oil and metal prices.
All eyes are on Mexico's policy decision on Thursday, wherein another interest rate cut is expected, according to nearly all analysts surveyed in a Reuters Open, as inflation slows and the Federal Reserve already approved an aggressive rate cut.
Colombia's peso COP= hit a one-week low, owing to an over 1% fall in oil prices that also weighed on Mexico's peso. Colombia's central bank policy decision is also due next week.
Further, economic committees in Colombia's Congress on Tuesday rejected the government's proposed budget for 2025 amid fierce debate over its $126 billion value, but the government could push it through by decree.
Brazil's real BRL= also weakened 0.3% after data showed inflation slowed much more than expected in its mid-September reading, in the first CPI figures released since the country's central bank decided to embark on a monetary tightening cycle.
The largest Latam country also recorded a wider-than-expected current account deficit in August, as trade surplus more than halved from a year earlier and the services account deficit deepened.
Meanwhile, a poll showed Chile is expected to lower its benchmark interest rate by 25 basis points from the current 5.50%.
The Chilean peso CLP= bucked the weak trend in Latam currencies and edged 0.1% higher against the dollar.
Argentina's economic activity and retail sales data are also due later in the day.
Talking about growth across Latam countries, Capital Economics' EM economist Kimberley Sperrfechter expects it to be weaker than most expect in the next couple of years amid tight policy and worsening terms of trade. Plus, monetary easing will be slow as inflation could stay above central banks' targets in many countries.
Elsewhere, Czech Republic cut its rates by 25 basis points as expected, maintaining a slowed-down pace of easing as inflation hangs near target, the crown holds steady and the economy slowly recovers. The central bank, however, stated its board does not have any commitment on continued rate cuts.
The crown EURCZK= was last down 0.1% against the euro, having hovered on the weak side of the 25-per-euro level recently since hitting a two-year low of 25.522 in August.
HIGHLIGHTS:
** Czech government approves higher budget deficit targets after floods
** UAE c.bank sees 4% GDP growth in 2024, state news agency reports
Key Latin American stock indexes and currencies at xx GMT:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1137.32 | 0.47 |
MSCI LatAm .MILA00000PUS | 2264.4 | -0.20 |
Brazil Bovespa .BVSP | 132317.64 | 0.12 |
Mexico IPC .MXX | 53497.15 | -0.29 |
Chile IPSA .SPIPSA | 6423.27 | -0.41 |
Argentina Merval .MERV | 1774667.88 | NULL |
Colombia COLCAP .COLCAP | 1322.4 | -0.94 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4709 | -0.3 |
Mexico peso MXN= | 19.447 | -0.73 |
Chile peso CLP= | 909.1 | 0.14 |
Colombia peso COP= | 4176.5 | -0.56 |
Peru sol PEN= | 3.7528 | -0.12 |
Argentina peso (interbank) ARS=RASL | 966.5 | -0.103466115 |
Argentina peso (parallel) ARSB= | 1225 | 1.632653061 |
Reporting by Ankika Biswas in Bengaluru, Editing by Nick Zieminski
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