Latam FX at 5-year high as dollar dips ahead of U.S. inflation data

Latin American currencies touched a five-year high on

Tuesday as the dollar slid ahead of Wednesday’s U.S inflation

data that could offer more clarity on the Federal Reserve’s

future monetary policy path.

The MSCI’s Latin American currencies index

rose 1.1% by 18:08 GMT, to its highest level since 2018.

“The USD’s downtrend could stall a bit in the

short-term, aided by the expectations of another Fed hike next

month. However, much will hinge on the near-term data releases,

especially the March CPI print,” wrote TD Securities strategists

in a note.

The Brazilian real rose 1.3% against the

greenback, touching its highest level in over two months.

Brazil’s consumer prices showed a deceleration in March

compared to the previous month, fueling expectations of monetary

easing.

“When it comes to Brazil, their own energy independence,

their own push for reforms and trying to cooperate better with

trade, is adding to the attractiveness going into EM and into

the real (BRL) specifically,” said Juan Perez, director of

trading at Monex.

Brazil’s Finance Minister Fernando Haddad said on Tuesday

that there will be space for interest rate cuts with “increased

confidence in the country’s fiscal framework and a fiscal

consolidation path consistently affecting inflation

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expectations.”

The Chilean peso rose 1.2% as a softer greenback

offered support to copper prices, aiding the currency of the

world’s largest copper producer.

Chile is expected to maintain its benchmark interest rate at

11.25% in its upcoming meetings in May and June, a poll of

analysts said on Tuesday.

Currency of Peru, the second biggest copper producer

after Chile, advanced 0.5%.

Colombia’s peso gained 1.1% against the dollar, as

the oil producer’s currency benefited from steady oil prices.

The recent bounce in commodity prices, coupled with a

weakening U.S. dollar, has boosted Latin American currencies

9.2% since the start of the year.

Mexico’s peso, was the outlier on Tuesday, slipping

marginally in choppy trade.

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Data showed Mexico’s industrial output rose 0.7% in February

from January.

Latin American stocks rose 3.8%, helped by a

4.4% gain in Brazil’s Bovespa index as mining stocks

such as Vale rallied.

The International Monetary Fund trimmed its 2023 global

growth outlook slightly as higher interest rates cool activity

but warned that a severe flare-up of financial system turmoil

could slash output to near recessionary levels.

The IMF also pegged

economic growth

in Latin America and the Caribbean at 1.6% in 2023 and 2.2%

in 2024.

Key Latin American stock indexes and currencies at 1808 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 995.99 0.74

MSCI LatAm 2262.35 3.74

Brazil Bovespa 106178.67 4.25

Mexico IPC 54480.88 0.75

Chile IPSA 5298.66 0.34

Argentina MerVal 261879.57 1.999

Colombia COLCAP 1212.29 1

Currencies Latest Daily % change

Brazil real 5.0025 1.26

Mexico peso 18.1688 -0.04

Chile peso 808.6 1.22

Colombia peso 4503.36 1.16

Peru sol 3.7771 -0.21

Argentina peso 213.7600 -0.17

(interbank)

Argentina peso 389 0.51

(parallel)

(Reporting by Shashwat Chauhan, Bansari Mayur Kamdar and Amruta

Khandekar in Bengaluru

Editing by Nick Zieminski)