* Mexico inflation rises more than expected
* 25bp rate hike likely in Mexico next month – economist
* Copper prices rise on earnings optimism
* Mexico’s Alfa rises on strong Q2
(Updates prices)
By Ambar Warrick and Susan Mathew
July 22 (Reuters) – Most Latin American currencies fell on
Thursday as rising COVID-19 cases spurred caution, while
Mexico’s peso gained after data showing higher
than-expected-inflation fueled bets of more interest rate hikes.
After hitting one-month lows on Wednesday, Mexico’s peso
rose 0.2%, erasing early session losses.
Consumer prices rose 5.75% during the first two weeks of
this month, data showed, accelerating slightly from the previous
two-week period and above expectations of 5.65%.
“The central bank has shown that it will act to clamp down
on above-target inflation, suggesting that another 25bp rate
hike, to 4.50%, is likely at its next meeting in August,” said
Nikhil Sanghani, an EM economist with Capital Economics.
But COVID fears remained. Mexico on Wednesday posted its
biggest jump in COVID-19 cases since early January.

Brazil’s real shed 0.3%, as infections rose by more
than 54,000 on Wednesday. More infections are likely to cause
renewed lockdown measures and further hamper growth in Latam’s
largest economy.
But helping keep hopes of bettering economic fundamentals
alive, Brazil’s government on Thursday cut its 2021 primary
budget deficit forecast, on an expected jump in tax revenues on
the back of stronger economic growth.
Peru’s sol rose 0.2% as copper prices rose on
optimism over a strong second-quarter earnings season.
Optimism over corporate earnings also helped investors look
past recent concerns over economic growth, with broader emerging
markets staging a strong recovery.
Safe-havens such as the dollar and the Japanese yen
came off peaks hit this week, while the European Central
Bank vowed to keep policy dovish for even longer to shore up
economic growth.
But Latin American assets lagged their peers due to rising
COVID-19 cases in major economies.
The Pan American Health Organization said the Americas is
facing a pandemic of the unvaccinated, as it warned countries
with low inoculation rates are seeing increases in COVID-19 and
repeated a call for vaccine donations.
Losses in Colombia’s peso were somewhat mitigated as
ratings agency Fitch said the new tax reform bill will help
stabilize the country’s strained public finances.
But the agency said more fiscal action was required to bring
down government debt levels.
Mexico’s IPC index led gains among Latam stocks, with
shares of conglomerate Alfa rising 1.8% a day after
the company posted strong second-quarter earnings.
Argentina’s Merval index slipped after scaling
one-month highs the previous day.

Key Latin American stock indexes and currencies:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 1326.18 1.07

MSCI LatAm 2539.07 0.96

Brazil Bovespa 126312.81 0.3

Mexico IPC 50275.65 0.48

Chile IPSA 4267.56 -0.18

Argentina MerVal 65538.55 -0.446

Colombia COLCAP 1251.42 0.06

Currencies Latest Daily %
change
Brazil real 5.2079 -0.31

Mexico peso 20.1117 0.10

Chile peso 753.2 -0.17

Colombia peso 3866.2 -0.39

Peru sol 3.933 0.33

Argentina peso 96.4000 -0.03
(interbank)

(Reporting by Ambar Warrick, Editing by William Maclean and
Leslie Adler)

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