By, 0 Min Read * Latam FX surge as dollar falls after Powell’s dovishness * Brazil’s real rises 1.9 percent * Chile’s peso rises, with a 25 basis point raise forecast * America Movil profits more than double in Q2
(Adds reaction to Powell’s speech and updates prices)
Susan Mathew and Ambar Warrick
14 JULY (Reuters) – On Wednesday, the Brazilian real gained 2% following a big improvement to the country’s economic growth outlook, while the Chilean peso gained 1% as investors anticipated a rate hike by the central bank later in the day.
Most other Latin American currencies rose sharply as the dollar fell as US Federal Reserve Chair Jerome Powell maintained his dovish attitude, assuaging expectations that the Fed might tighten policy sooner rather than later due to growing inflation.
The last time the real traded against the dollar was at 5.077.
Brazil’s economy ministry predicted that the country’s GDP will expand by 5.3 percent in 2021, significantly higher than the prior prediction of 3.5 percent. The country wanted to raise 100 billion reais ($19.64 billion) through a long-awaited income tax reform proposal, according to the report.
The new prediction backs up market expectations for improved growth in Latin America’s largest economy, which has also helped the actual economy weather political turmoil surrounding a mounting corruption scandal.
The Chilean peso rose 0.4 percent, with investors anticipating a 25 basis point rate hike by the central bank to 0.75 percent, based on hawkish comments in the bank’s latest meeting minutes.
With inflation on the rise, many anticipate the central bank to intervene to prevent future price rises. Increased expectations for the country’s economic growth have also decreased the necessity for too accommodating policy.
With inflation ramping up on reopening momentum, tighter policy has becoming a prevalent pattern across emerging markets this year.
However, given hawkish central banks, Tina Vandersteel, head of emerging country debt at GMO, sees increasing inflation as a “benign” risk for EM bonds. Mexico, Turkey, and South Africa, she believes, are sovereign debt hotspots.
Despite falling oil prices, Mexico’s peso increased by 1%, while Colombia’s peso increased by 0.8 percent.
The peso was recovering from heavy losses caused by fears of government meddling in the country’s energy industry.
Since February, the country has seen the highest spike in new COVID-19 infections.
“We see MXN appreciation potential capped in the medium to longer term by the shaky economy and muted growth prospects due to a lack of investment,” said Elisabeth Andreae, a Commerzbank FX and EM analyst.
Mexican equities rose on the day, with telecommunications major America Movil soaring 6% after reporting a more than quadrupled second-quarter net profit.
Colombia plans to raise about $4 billion through a new tax reform proposal to Congress, according to Finance Minister Jose Manuel Restrepo.
Stock indices and currencies in Latin America: Stock indices The most recent daily percent change
MSCI Emerging Markets 1339.33 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01
MSCI LatAm 2604.50 1.41 MSCI LatAm 2604.50 1.41 MSCI LatAm 2604.
Brazil’s Bovespa index is currently trading at 128315.80 0.12.
Mexico IPC 49440.44 0.34 Mexico IPC 49440.44 0.34 Mexico IPC 49440.44
IPSA 4158.69 -0.95 Chile IPSA 4158.69 -0.95 Chile IPSA 4158.69
Argentina MerVal 64149.35 -0.35 Argentina MerVal 64149.35 -0.35 Argentina MerVal 64149.35
COLCAP 1285.43 -0.64 COLCAP 1285.43 -0.64 COLCAP 1285.43 –
Brazil real 5.0771 2.04 USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD
Mexico’s peso is 19.8651 0.95 dollars.
746.9 0.33 Chilean peso
The Colombian peso is worth 3790.77 cents.
3.9543 0.55 Peru sulfate of potash
Argentina’s peso is now trading at 96.1500 -0.02. (interbank)
(Ambar Warrick contributed reporting, and Marguerita Choy edited the piece.)/n
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