Latam FX down as strong US data boosts dollar
Updated at 10:36 a.m. ET/ 1436 GMT
Chile rate decision later in the day; 25-bps cut expected
Mexican peso briefly slips below 20 per dollar
Latam stocks down 0.5%, FX off 0.1%
By Shashwat Chauhan
Oct 17 (Reuters) -Most Latin American currencies slipped against a firm dollar on Thursday, as a strong retail sales reading boosted confidence that the U.S. economy remains resilient, weakening the case for bigger interest rate cuts by the Federal Reserve.
The dollar index =USD, which measures the U.S. currency against a basket of global peers, touched 11-week highs after data showed U.S. retail sales increased solidly in September, supporting the view that the economy maintained a strong growth pace in the third quarter.
"The implications for monetary policy center on whether the Fed worries that the renewed strength in the economy fuels an uptick in inflation, although expectations remain that there will be a 25 basis point cut at the next meeting," said Quincy Krosby, chief global strategist for LPL Financial.
Mexico's peso MXN= weakened 0.3%, briefly breaching the psychologically important barrier of 20 per dollar during the session.
Brazil's real BRL= shed 0.1%, down for the third straight session, while the Colombian peso COP= lost 0.2%.
Chile's peso CLP= dropped 1.5% in lead-up to a local monetary policy decision, with its central bank widely expected to cut lending rates by 25 basis-points to 5.25% later in the day.
Analysts also attribute the dollar's strength and weakness in emerging market assets to the potential impact of a victory by former President Donald Trump in the upcoming U.S. election.
Trump's trade policies call for hefty tariffs on imported goods, which could spur weakness in key trading partners such as Mexico.
"A Trump Presidency with tariffs will be a non-linear shock to markets as it is still under-priced," analysts at TD Securities said in a note.
Also dampening sentiment, China will expand a "white list" of housing projects eligible for financing and increase bank lending for such developments to 4 trillion yuan ($562 billion) by year-end, a move which analysts feel did little to alleviate growth concerns.
MSCI's index for Latin American currencies .MILA00000CUS slipped 0.1%, while stocks .MILA00000PUS were down 0.5%.
Regional heavyweight Brazil's Bovespa index .BVSP was down close to 1%, as losses in materials and healthcare stocks weighed.
Elsewhere in emerging markets, Turkey's central bank held interest rates at 50% as expected but warned that a bump in recent inflation data lifted uncertainty, in a hawkish signal that could reinforce views that policy easing will not begin until next year.
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Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1135.06 | -0.78 |
MSCI LatAm .MILA00000PUS | 2173.02 | -0.51 |
Brazil Bovespa .BVSP | 130507.92 | -0.94 |
Mexico IPC .MXX | 52438.48 | -0.09 |
Chile IPSA .SPIPSA | 6574.84 | 0.49 |
Argentina Merval .MERV | 1793871.4 | 1.003 |
Colombia COLCAP .COLCAP | 1340.79 | 0.26 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.668 | -0.05 |
Mexico peso MXN= | 19.9129 | -0.32 |
Chile peso CLP= | 946.7 | -1.47 |
Colombia peso COP= | 4265.05 | -0.21 |
Peru sol PEN= | 3.771 | -0.23 |
Argentina peso (interbank) ARS=RASL | 980.5 | 0.00 |
Argentina peso (parallel) ARSB= | 1200 | 1.67 |
Reporting by Shashwat Chauhan in Bengaluru. Editing by Jane Merriman
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