Most Latin American currencies decline amid risk-off trading
Brazil's Petrobras rises after announcing bumper dividend
Mexico's annual inflation rate falls in early November
Latam FX down 0.2%, stocks up 1%
Updates with mid-session trading
By Shashwat Chauhan and Pranav Kashyap
Nov 22 (Reuters) -Most Latin American currencies slipped on Friday, as elevated geopolitical worries between Russia and Ukraine and weaker commodity prices exerted pressure, while softer inflation data in Mexico also weighed on its currency.
Copper-producing Chile's peso CLP= led declines in the region. It shed 1.3%, taking direction from falling prices of the red metal. MET/L
Mexico's peso MXN= depreciated 0.3%, set to drop for a second straight week against the dollar. Data showed Mexico's annual inflation rate eased in early November, boosting bets that the central bank will continue to cut interest rates.
"In our view, the inflation reading is consistent with Banxico cutting further its policy rate," Citi analysts noted.
"While some board members have suggested they will evaluate larger rate cuts in the future, we think lingering internal and external risks amid still high services inflation will prevent most board members supporting an acceleration."
Last week, the Bank of Mexico lowered its benchmark interest rate by 25 basis points, with its five-member governing board voting unanimously for the reduction.
A separate reading showed Latin America's second-largest economy expanded 1.1% in the third quarter compared to the April-June period, almost in line with the 1.0% increase expected by economists polled by Reuters.
Brazil's real BRL= was trading flat against the dollar. However, it was on track for its second successive weekly drop, while Colombia's peso COP= fell 0.6% against the dollar in light trading.
Brazil Institutional Relations Minister Alexandre Padilha said President Luiz Inacio Lula da Silva and Finance Minister Fernando Haddad were doing "adequate pruning of a growing tree", referring to a fiscal spending-cut package that has been in the works for weeks.
The real has been under significant pressure as the government hesitates to unveil the package. President Lula has not finalized details or set a date for the announcement.
Meanwhile, global markets remained wary of risk assets such as the ones in Latin America amid elevated geopolitical tensions between Russia and Ukraine. MKTS/GLOB
The Kremlin said on Friday that a strike on Ukraine using a newly developed hypersonic ballistic missile was a message to the West that Moscow will respond harshly to any "reckless" Western actions in support of Ukraine.
Another source of pressure for Latin American currencies is continued dollar strength globally on bets the Federal Reserve would slow its pace of monetary policy easing.
Implications of U.S. President-elect Donald Trump's fiscal, trade and immigration policies, which could be a drag on most developing economies, have dented gains in Latin America. Close trading partners to the United States, such as Mexico, are among the worst-hit.
"The US dollar has rallied further this week as investors have continued to price in the implications of a second Trump term," James Reilly, senior markets economist at Capital Economics said in a note.
MSCI's gauge for Latin American currencies .MILA00000CUS fell 0.2%, while stocks .MILA00000PUS rose 1%.
Brazil's Bovespa index .BVSP was up 1.4%, boosted by a more than 3% rise in Petrobras PETR4.SA after the state-run oil firm approved a payout of 20 billion reais ($3.4 billion) in extraordinary dividends to shareholders, and lowered the minimum cash level required for its $111-billion strategic plan.
Despite Friday's gains, the Brazilian benchmark was set for its fifth straight weekly fall.
Key Latin American stock indexes and currencies:
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1087.23 | 0.16 |
MSCI LatAm .MILA00000PUS | 2081.09 | 1.04 |
Brazil Bovespa .BVSP | 128697.14 | 1.4 |
Mexico IPC .MXX | 50435.93 | 0.52 |
Chile IPSA .SPIPSA | 6564.54 | -0.43 |
Argentina MerVal .MERV | 2207142.14 | 3.13 |
Colombia COLCAP .COLCAP | 1391.84 | 0.26 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.8116 | 0.05 |
Mexico peso MXN= | 20.475 | -0.35 |
Chile peso CLP= | 986.67 | -1.34 |
Colombia peso COP= | 4415.38 | -0.63 |
Peru sol PEN= | 3.787 | 0.08 |
Argentina peso (interbank) ARS=RASL | 1,004.0 | 0.05 |
Argentina peso (parallel) ARSB= | 1,115.0 | 1.33 |
Reporting by Shashwat Chauhan and Pranav Kashyap in Bengaluru; Editing by Rod Nickel
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