Currencies of Mexico, Brazil rise over 1%; US elections eyed
Updated at 1543 GMT
Rate decisions out of Brazil, Peru due later in the week
MSCI Latam stocks index up 2%, FX up 0.9%
By Johann M Cherian
Nov 4 (Reuters) -The currencies of Brazil and Mexico led gains in Latin America on Monday, as investors geared up for a busy week including economic data, monetary policy decisions by central banks in the region and the U.S. presidential election.
MSCI's index tracking currencies in the region .MILA00000CUS climbed 0.9%, against a softening dollar, with markets preparing for a number of events out of the world's largest economy - including a Federal Reserve monetary policy decision later this week.
Mexico's peso MXN= appreciated by 1.5%. One-week implied options volatility on the dollar vs the peso MXNUSD=R hit its highest level since April 2020.
However, the peso is among underperformers in the region, hurt by Republican candidate Donald Trump's rhetoric, among other factors. He has threatened to lift tariffs on trade partners, including a 200% surcharge on auto imports from Mexico, and to renegotiate the USMCA free trade deal.
U.S. Democratic candidate Kamala Harris has gained in some polls but she and Trump remain almost tied in opinion polls. The election takes place on Tuesday but the winner might not be known for days.
Malcolm Dorson, head of emerging markets strategy at Global X, said the peso is among the currencies that are most sensitive to the outcome of the U.S. election.
"A lot of people are just thinking of Mexico because of USMCA and a lot of political changes recently... so they're repricing the potential of more foreign direct investment into the country."
Brazil's real BRL= gained 1.8% to 5.76 to the dollar. The country's finance minister, Fernando Haddad, canceled a trip to Europe this week, amid pressure from markets for the government to present spending cut measures that had been promised.
The currency has lost over 16% of its value so far this year, despite the Brazilian central bank's recent hawkish pivot, on expectations that the government's fiscal spending will stoke inflation and thwart the regulator's goal of lowering price pressures.
"(President Luiz Inacio Lula da Silva) has historically not cared too much about equity markets, but when the FX gets above 5.70 or so, he starts trying to take in advice and feedback... so I wouldn't be surprised to see some cooperation there," Dorson said.
Yields on bonds across the curve BR10YT=RR, BR5YT=RR, BR2YT=RR added over 20 basis points each ahead of the central bank's rate decision later in the week.
The currencies of copper producers Chile CLP= and Peru PEN= rose 0.9% and 0.3% respectively, tracking higher prices of the red metal.
On the equities front, a gauge tracking regional bourses .MILA00000PUS added 2%, with Brazil's bovespa .BVSP up 1.7%.
Mexican stocks .MXX rose 1% and Argentina's MerVal index .MERV added 2%.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1130.13 | 0.7 |
MSCI LatAm .MILA00000PUS | 2132.54 | 2.01 |
Brazil Bovespa .BVSP | 130330.1 | 1.72 |
Mexico IPC .MXX | 51080.14 | 0.9 |
Chile IPSA .SPIPSA | 6643.82 | 1.43 |
Argentina Merval .MERV | 1916630.25 | 1.955 |
Colombia COLCAP .COLCAP | 1352.8 | -0.42 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.76 | 1.84 |
Mexico peso MXN= | 19.9607 | 1.51 |
Chile peso CLP= | 951.63 | 0.95 |
Colombia peso COP= | 4416.5 | 0.42 |
Peru sol PEN= | 3.7614 | 0.31 |
Argentina peso (interbank) ARS=RASL | 992 | -0.15 |
Argentina peso (parallel) ARSB= | 1160 | 2.52 |
Reporting by Johann M Cherian in Bengaluru
Editing by Gareth Jones
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