Most Latin American currencies fall as risk-off trade continues
Brazil's Petrobras rises after announcing bumper dividend
Mexico's annual inflation rate falls in early November
Latam FX down 0.5%, stocks up 0.1%
By Shashwat Chauhan
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 a softer inflation print in Mexico also weighed on its currency.
Mexico's peso MXN= depreciated 0.6% against the dollar after 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 had 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= slipped 0.3% against the dollar, on track for its second successive weekly drop, while Colombia's peso COP= too fell 0.9% against the dollar in light trading.
Copper Chile's peso CLP= shed 1%, also taking direction from falling prices of the red metal. MET/L
Global markets remained wary of risk assets such as the ones in Latin America amid elevated geopolitical tensions between Russia and Ukraine.
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 down 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 with close trading partners to United States like Mexico amongst the worst hit.
MSCI's gauge for Latin American currencies .MILA00000CUS fell 0.5% as of 10:00 a.m. ET, while stocks .MILA00000PUS rose 0.1%.
Brazil's Bovespa index .BVSP was up 0.6%, boosted by a more than 2% 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:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1086.33 | 0.08 |
MSCI LatAm .MILA00000PUS | 2062.44 | 0.13 |
Brazil Bovespa .BVSP | 127689.73 | 0.6 |
Mexico IPC .MXX | 50197.08 | 0.04 |
Chile IPSA .SPIPSA | 6567.94 | -0.38 |
Argentina Merval .MERV | 2139890.87 | -0.01 |
Colombia COLCAP .COLCAP | 1390.84 | 0.19 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.8293 | -0.26 |
Mexico peso MXN= | 20.524 | -0.59 |
Chile peso CLP= | 983.48 | -1.01 |
Colombia peso COP= | 4428.68 | -0.94 |
Peru sol PEN= | 3.7949 | -0.13 |
Argentina peso (interbank) ARS=RASL | 1003.5 | 0.10 |
Argentina peso (parallel) ARSB= | 1105 | 2.26 |
Reporting by Shashwat Chauhan in Bengaluru
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