EMERGING MARKETS-Mexican peso slips ahead of expected rate hike; Latam FX dips

Bansari Mayur Kamdar
·3 min read

* Latam currencies off 0.4%; stocks drop 1.1% * Mexican central bank seen pushing key rate to record 9.25% * Colombia central bank to weigh sharp or moderate rate rise * Brazil central bank ups 2022 GDP growth forecast to 2.7% * Chile unemployment rate hits 7.9% in quarter through August By Bansari Mayur Kamdar Sept 29 (Reuters) - The Mexican peso fell ahead of an expected 75 basis point hike by its central bank later on Thursday as Latin America's second-largest economy strived to tackle stubbornly high inflation and follow in the steps of an increasingly hawkish U.S. Federal Reserve. Latin American currencies declined 0.4% in early trading, with Mexico's peso slipping 0.3% against the dollar. The Bank of Mexico is expected to raise its key interest rate to a record 9.25% later in the day, following the Fed's recent 75 basis point hike. Annual inflation in Mexico hit 8.76% in the first half of September, official data showed last week. The Brazilian real, dipped 0.5%, adding to its steep losses earlier this week, even as the central bank improved its economic growth outlook for 2022 and data showed Brazil created more formal jobs than expected in August. Nonetheless, the currency of Latin America's largest economy is headed for decline of over 4% this month as market volatility adds to a risk-off mood ahead of Brazil's presidential elections. "Positioning in both the BRL (real) and rates appears to be relatively light, and we see room for a rally with the elections out of the way. Brazil is one of the few countries in EM where inflation has peaked and the BCB (Banco Central do Brasil) is basically done," wrote analysts at Citi in a note. Voters in Brazil head to the polls for a first-round presidential vote on Oct. 2, with former President Luiz Inacio Lula da Silva expanding his lead over the incumbent far-right President Jair Bolsonaro in the latest polls even as fears of post-election turmoil persist. The Colombian peso fell 0.9% against the dollar ahead of a decision by country's seven-member central bank board on whether to continue sharp rate hikes or moderate its increases, as inflation pressures and robust domestic consumption endure. Chile's peso dropped 1.3% after sharp gains in the previous session, while the Peruvian sol slipped 0.2%. Data showed Chile's unemployment rate came in at 7.9% in the June-August period, flat from the quarter through July. Regional stocks fell 1.1%. Elsewhere, the Czech National Bank kept interest rates unchanged on Thursday as expected and Kenya's central bank raised its benchmark lending rate by 75 basis points. Key Latin American stock indexes and currencies at 14:59 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 874.47 -0.16 MSCI LatAm 2027.03 -1.08 Brazil Bovespa 106529.59 -1.77 Mexico IPC 45176.58 -0.58 Chile IPSA 5080.60 -0.39 Argentina MerVal 135998.36 -1.467 Colombia COLCAP 1121.93 -0.74 Currencies Latest Daily % change Brazil real 5.4020 -0.99 Mexico peso 20.1992 -0.41 Chile peso 968.9 -1.38 Colombia peso 4525.73 -0.92 Peru sol 3.9388 -0.17 Argentina peso 147.1000 -0.16 (interbank) Argentina peso 286 1.40 (parallel) (Reporting by Bansari Mayur Kamdar and Susan Mathew in Bengaluru; Editing by Andrea Ricci)

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