Most Latam FX down as Middle East tensions spark safe-haven demand
Sheinbaum sworn in as Mexico's first woman president
Peru consumer prices slow in September to lowest since 2020
Iran hits Israel with salvo of ballistic missiles
Latam stocks up 0.2%, FX off 0.2%
Updated at 3:25 p.m. ET/ 1925 GMT
By Ankika Biswas and Shashwat Chauhan
Oct 1 (Reuters) -Most Latin American currencies dropped against a firmer dollar onTuesday as an escalation in Middle East tensions steered investors away from risky assets to safe-haven ones, though Mexico's peso reversed its initial losses.
Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon, and Israel vowed a "painful response" against its enemy.
"Military conflicts can quickly escalate into a scenario that causes markets to sell off dramatically, with safe haven assets such as gold and Treasuries seeing heavy inflows," said Quincy Krosby, chief global strategist at LPL Financial.
"It is akin to lighting a match and suddenly the flame can't be controlled."
Safe-haven assets such as gold XAU=, the Swiss franc CHF= and the Japanese yen JPY= rose, while MSCI's index for Latam currencies index .MILA00000CUS fell 0.2%.
This comes on top of a strong U.S. dollar =USD, propped by easing bets of a 50-basis-point interest rate cut after Federal Reserve Chair Jerome Powell's overnight comments, that had pressured most emerging market asset classes after a strong monthly performance.
Mexico's peso MXN= reversed losses to rise 0.4%. Claudia Sheinbaum wassworn in as Mexico's first woman president, taking the reins at a time the country is struggling with violence from organized crime and a hefty deficit in Latin America's No. 2 economy.
Political watchers and analysts predict Sheinbaum will urgently look to calm investors following the passing of a controversial judicial reform pushed by her predecessor Andres Manuel Lopez Obrador.
Also, the Bank of Mexico may consider larger interest rate cuts going forward as inflation cools, bank governor Victoria Rodriguez told Reuters. This follows last week's 25-basis-point rate cut.
The Brazilian real BRL= eased 0.2%, while Colombia's peso COP= slipped 0.1% against a firmer greenback.
Brazil's central bank chief said that the country's risk premium increase on its local yield curve seems "exaggerated" compared with peers, whose economies also are not generating primary surpluses.
Peru's sol PEN= weakened 0.4% after inflation in September surprised analysts as it slowed to below 2% for the first time in four years, increasing the odds that the nation's central bank will extend a streak of interest rate cuts.
A spike in metal prices on the back of China's series of stimulus measures and the Federal Reserve's recent interest-rate cut were the major drivers of emerging market stocks and currencies' upbeat performance last month.
The drop in the resource-rich Latin American currencies comes even as commodity prices were up on the day, with oil prices jumping around 3% on the worsening geopolitical situation.
Latin American equities .MILA00000PUS added 0.2%. Local bourses in Brazil .BVSP and Argentina .MERV rose 0.7% and 2%, respectively.
HIGHLIGHTS:
** Zimbabwe bankers wary of more shocks after sharp ZiG devaluation
** Romania aims to sell domestic debt worth 6.4 bln lei in October
** Pakistan's annual consumer price inflation slows to 6.9% in September
** Chile'seconomic activity jumps 2.3% year-on-year in August
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1170.53 | -0.03 |
MSCI LatAm .MILA00000PUS | 2242.29 | 0.22 |
Brazil Bovespa .BVSP | 132781.54 | 0.73 |
Mexico IPC .MXX | 52477.3 | -0.57 |
Chile IPSA .SPIPSA | 6452.64 | -0.58 |
Argentina Merval .MERV | 1732460.8 | 2.066 |
Colombia COLCAP .COLCAP | 1308.23 | 0.05 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.458 | -0.18 |
Mexico peso MXN= | 19.601 | 0.39 |
Chile peso CLP= | 904.67 | -0.68 |
Colombia peso COP= | 4209.53 | -0.08 |
Peru sol PEN= | 3.7055 | -0.44 |
Argentina peso (interbank) ARS=RASL | 969.5 | -0.051572976 |
Argentina peso (parallel) ARSB= | 1200 | 2.916666667 |
Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru, Editing by Nick Zieminski
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