Chilean peso leaps on central bank support, Brazil real slides

Author of the article: Reuters Bansari Mayur Kamdar and Shreyashi Sanyal Published Dec 27, 2022  •  2 minute read Join the conversation Chile’s peso jumped on Tuesday after its central bank said it would extend its foreign exchange intervention program, while Financial Post Top Stories Sign up to receive the daily top stories from the…
Chilean peso leaps on central bank support, Brazil real slides

Author of the article:

Reuters

Bansari Mayur Kamdar and Shreyashi Sanyal

Published Dec 27, 2022  •  2 minute read

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Chile’s peso jumped on Tuesday after its central bank said

it would extend its foreign exchange intervention program, while

Financial Post Top Stories

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Brazil’s real extended declines to a second day against a firmer

dollar.

The peso gained 1.3% against the dollar after Chile’s

central bank extended its FX intervention program to June 2,

2023 from a previously announced end date of Jan. 13.

Since last year, the Chilean central bank has

aggressively raised interest rates to contain inflation, but a

recent poll

of traders showed it is expected to keep the benchmark

interest rate at 11.25% at its January meeting, before an easing

cycle that would take rates to 6.5% within 12 months.

Most Latin American economies are in a much more mature

stage in their tightening cycle, which analysts say could be a

contributing factor to growth next year, along with an expected

boost from China as it loosens strict COVID curbs.

The MSCI’s index for Latin American currencies

is eyeing gains of nearly 15% this year, while

its stocks counterpart is set to end the year flat. Broader EM

currencies tracked yearly declines of 4.5%,

while stocks dropped over 22%.

“China’s tame growth seems set to accelerate in 2023 as

the country undertakes a bumpy reopening, and EM early hikers

largely avoided sharp contractions despite their aggressive

hiking campaigns,” economists at Goldman Sachs wrote in a note

to clients.

China said it will stop requiring inbound travelers to go

into quarantine starting from Jan. 8 in a major step towards

easing curbs on its borders, which have been largely shut since

2020. This helped lift prices of copper, which also supported

Chile’s peso.

Brazil’s real slid 1.6% by afternoon trading,

against a rebounding dollar. Mexico’s peso and

Colombia’s peso fell.

Brazil’s central bank data showed borrowing costs in bank

loans in Brazil rose in November to the highest level in more

than five years, while default ratios continued to grow, under

the effects of an aggressive monetary tightening cycle to tame

inflation.

Meanwhile, Brazil’s sovereign floating rate bond redemptions

will hit a record high next year, underscoring the fiscal

challenge facing President-elect Luiz Inacio Lula da Silva as he

raises the spending ceiling to fund a social welfare package.

The real has been the best performing currency in the

region, up 5.5% so far this year.

Key Latin American stock indexes and currencies at 1946 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 958.77 0.24

MSCI LatAm 2127.45 -2.23

Brazil Bovespa 108150.94 -0.54

Mexico IPC 50373.89 0.2

Chile IPSA 5197.25 -0.48

Argentina MerVal 195804.89 1.729

Colombia COLCAP 1251.14 0.29

Currencies Latest Daily %

change

Brazil real 5.2908 -1.57

Mexico peso 19.4771 -0.47

Chile peso 867.4 1.10

Colombia peso 4762 -0.73

Peru sol 3.7981 0.15

Argentina peso (interbank) 176.0500 -0.16

Argentina peso (parallel) 352 -1.70

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in

Bengaluru

Editing by Tomasz Janowski and Chizu Nomiyama)

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