Currencies slide as dollar rules after strong U.S. jobs data

Emerging market currencies turned to

losses on Friday after strong payroll numbers from the United

States raised bets of another large hike by the Federal Reserve,

sending the dollar soaring.

South Africa’s rand, Chile’s peso and the

Colombian currency lost 1% each, while the Chinese yuan

gave up session losses to trade 0.2% lower.

Mexico’s peso fell 0.1%, while Brazil’s real

slipped about half a percent.

A lesser-than-expected hike in Romania’s key interest rate

made little difference to the leu which traded flat,

despite the dollar rally weighing on the euro.

U.S. employers hired 528,000 workers in July, more than

double what was expected, and the unemployment rate fell to a

pre-pandemic low of 3.5%, providing the strongest evidence yet

that the economy was not in recession, and keeping the Fed on

track to hike.

“It’s a blockbuster number. It really clears the path for

the Fed to continue with the hawkish viewpoints that have been

expressed recently, that they need to continue to really press

on inflation,” said Dean Smith, chief strategist at Foliobeyond,

New York.

“A 75 basis points hike in September is most likely.”

Bets for a 75 bps hike in September rose 65% as per

Refinitiv.

In Argentina, inflation in July could be so high that it

will “shock” Argentina’s government, an economy ministry source

told Reuters. This comes as new economy minister Sergio Massa

took office Wednesday in the midst of an economic crisis,

announcing measures intended to ensure fiscal austerity and to

shore up dwindling foreign currency reserves.

In the 12 months through June consumer prices hit 64.0%,

even as the central bank hiked the benchmark interest rate by

300 basis points to 52% last month to tame spiraling inflation.

Stocks in the region painted a brighter picture, with Brazil

shares gaining for a fourth straight session and hitting

eight-week highs, while Chile’s IPSA rose after a

four-session losing run.

Mexico, which is more dependent on the United States, saw

its shares fall, in line with main stocks indices on Wall

Street.

Key Latin American stock indexes and currencies at 1416 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1001.63 0.71

MSCI LatAm 2136.00 0.69

Brazil Bovespa 106419.01 0.5

Mexico IPC 46814.02 -0.22

Chile IPSA 5190.26 0.28

Argentina MerVal – –

Colombia COLCAP 1286.10 0.36

Currencies Latest Daily %

change

Brazil real 5.2270 -0.09

Mexico peso 20.3682 -0.21

Chile peso 909.3 -0.86

Colombia peso 4331.5 -1.06

Peru sol 3.8837 -0.11

Argentina peso 132.8600 -0.16

(interbank)

(Reporting by Susan Mathew in Bengaluru; Editing by Alistair

Bell)