Latam FX down as geopolitical jitters trigger risk-aversion
Chile economic activity below expectations
Brazilian real hits over two-year low
Safe haven assets such as U.S. dollar on the rise
Updated at 3:31 p.m. ET/ 1931 GMT
By Lisa Pauline Mattackal and Shashwat Chauhan
Aug 1 (Reuters) - Most LatinAmerican currencies slippedon Thursday as investors shied away from risky assets amid elevated geopolitical worries, boosting traditional safe-haven assets such as the U.S. dollar.
Global markets were on edge after Hamas leader Ismail Haniyeh was assassinated in the Iranian capital Tehran early on Wednesday morning, an attack that drew threats of revenge on Israel and fuelled further concern that the conflict in Gaza was turning into a wider Middle East war. MKTS/GLOB
Traditional safe-haven assets such as the greenback =USD and the Swiss franc CHF= appreciated, while most currencies in Latin America, generally considered as risky, fell with MSCI's index for the region .MILA00000CUS down 1.2%.
Brazil's real BRL= led losses, down 1.5% to 5.73 per dollar, hitting its lowest level in over two years,a day after its central bank held interest rates and warned "more vigilance" was necessary due to worsening inflation expectations and recent market swings.
"The unquestionable deterioration in the inflation outlook pushed Copom to escalate the hawkish tone, although not yet indicating an imminent interest rate hike," analysts at Citi wrote in a note.
Chile's peso CLP= reversed initial gains and was last down 1%.Chile's central bank on Wednesday had held its benchmark interest rate at 5.75% in a unanimous vote, in line with traders' expectations and marking the first time the bank has held the rate since the easing cycle began.
Separately, the country's IMACEC economic activity index grew 0.1% in June compared with a year earlier, well below the 1.7% growth expected by economists polled by Reuters.
Mexico's peso MXN= dropped and Colombia's peso COP= shed 0.9% each.
Peru's sol PEN= fared better than most, down 0.5% against the dollar. Data showed annual inflation in the country slowed to 2.13% in July even as consumer prices, mainly for food and transportation, rose for the second consecutive month.
The dollar's gains and weaker global manufacturing data, notably in China, further dented gains foremerging markets assets after the U.S. Federal Reserve signaled on Wednesday they could cut rates in September.
Emerging markets were somewhat bolstered in July on hopes for easier policy in the U.S., but were hit as a global equity selloff, resurgent geopolitical worries and signs of softening economic growth in economies like China have weighed.
On the equities front, MSCI's index of Latin American stocks .MILA00000PUS shed 1.9% following an over 1% jump in the last session. Most local bourses fell, in-line with a bruising selloff on Wall Street. .N
Colombia's EcoPetrol ECO.CN lost 2.3% after Occidental Petroleum OXY.N said the Colombian company will not buy a stake in shale oil producer CrownRock after reporting last month they were in talks for a potential stake sale.
Elsewhere in Latin America, tensions in Venezuela remained high amid protests over the results of its presidential election.
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Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1086.01 | 0.11 |
MSCI LatAm .MILA00000PUS | 2156.83 | -1.90 |
Brazil Bovespa .BVSP | 127257.81 | -0.31 |
Mexico IPC .MXX | 52352.05 | -1.4 |
Chile IPSA .SPIPSA | 6389.61 | -0.79 |
Argentina Merval .MERV | 1500945.07 | -0.454 |
Colombia COLCAP .COLCAP | 1337.21 | -0.63 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.7388 | -1.57 |
Mexico peso MXN= | 18.776 | -0.95 |
Chile peso CLP= | 951.9 | -1 |
Colombia peso COP= | 4082.57 | -0.86 |
Peru sol PEN= | 3.7385 | -0.49 |
Argentina peso (interbank) ARS=RASL | 931.5 | -0.053676865 |
Argentina peso (parallel) ARSB= | 1360 | 0.735294118 |
Reporting by Lisa Mattackal and Shashwat Chauhan in Bengaluru; Editing by Chris Reese and Diane Craft
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