Latam FX ease as markets brace for rate decision whirlwind
Latam FX down 0.4%; stocks down 1.1%
Brazil's central bank intervenes in FX market
Rate decisions in Mexico, Chile and Colombia this week
Argentina's stock benchmark at all-time highs
Updates with mid-session trading
By Pranav Kashyap and Shashwat Chauhan
Dec 16 (Reuters) -Most Latin American currencies were flat-to-lower on Monday as markets braced for a barrage of local central bank rate decisions and one in the United States, though Brazil's real continued its decline despite a central bank intervention.
Brazil's real BRL= continued to fall, down 0.8% even after the central bank announced a spot dollar auction in which it sold $1.63 billion. The bank will also hold a dollar-denominated auction with repurchase agreements for up to $3 billion on Monday.
The real hovers near its lowest level on record against the dollar as investors got spooked last month after the government announced a contentious tax reform package.
President Luiz Inacio Lula da Silva voiced his discontent with Brazil's sky-high interest rates, calling them the "only thing wrong" with the country during his first public address after being discharged from the hospital.
The country's Finance Minister Fernando Haddad said that Lula was calling on Congress not to water down a fiscal package aimed at curbing spending, which the government expects to be voted on this year.
"What we are seeing right now is a crisis of confidence in Brazil," said Andres Abadia, Pantheon Macroeconomics' chief Latin America economist.
Abadia also noted that the sell-off was triggered by Lula's comments. "He basically criticized the central bank implicitly. Those words have been taken badly by the market," he added.
Mexico's peso MXN= held firm at 20.1225 per dollar ahead of a local interest rate decision on Thursday, with expectations primed for a 25 basis points cut.
Chile's peso CLP= eased 0.4% in lead-up to a likely interest rate cut later in the week. Colombia's central bank is also expected to cut interest rates by 50-bps on Friday.
Focus for global markets this week will be the U.S. Fed's rate decision on Wednesday, with traders' bets indicating a more than 90% chance of a 25 basis-point cut.
The U.S. central bank's future guidance into 2025 would be under scrutiny, with markets betting at a pause in January, giving some strength to the greenback recently.
"Disinflation has slowed, which by itself would likely make the Federal Open Market Committee (FOMC) more cautious in 2025," said John Velis, FX and macro strategist at BNY.
MSCI's indexfor Latin American currencies .MILA00000CUS dipped 0.4%, while the stocks index .MILA00000PUS shed 1.1%.
Most local bourses in Latin America trended lower, though Argentina's benchmark .MERV jumped close to 7% to an all-time high.
In Mexico, Walmex WALMEX.MX was down 1.4% after Mexico's antitrust watchdog Cofece said it could fine the firm up to 8% of its income if it does not comply with a resolution prohibiting the retailer from engaging in illegal conduct.
HIGHLIGHTS
** Argentina's economy expands 3.9% in Q3 versus Q2
**Peru's economy grew 3.38% in October
**As Bolivia's big state economic model slowly implodes, fear of 'total crisis'
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1103.22 | -0.34 |
MSCI LatAm .MILA00000PUS | 1967.91 | -1.09 |
Brazil Bovespa .BVSP | 124322.89 | -0.23 |
Mexico IPC .MXX | 51084.03 | -1.04 |
Chile IPSA .SPIPSA | 6799.21 | 0.47 |
Argentina Merval .MERV | 2532383.68 | 6.822 |
Colombia COLCAP .COLCAP | 1373.89 | -0.45 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 6.089 | -0.78 |
Mexico peso MXN= | 20.1225 | flat |
Chile peso CLP= | 989.33 | -0.36 |
Colombia peso COP= | 4321 | -0.15 |
Peru sol PEN= | 3.736 | -0.27 |
Argentina peso (interbank) ARS=RASL | 1020.5 | -0.20 |
Argentina peso (parallel) ARSB= | 1105 | flat |
Reporting by Pranav Kashyap and Shashwat Chauhan in Bengaluru; Editing by Andrea Ricci and Aurora Ellis
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