Most Latin American currencies advance as Fed hints at possible rate cut
Fed holds rates steady, hints at September cut
Colombia cuts rates by 50 basis points, as expected
Brazilian central bank's rate decision awaited
Updated at 3:26 p.m. ET/1926 GMT
By Lisa Pauline Mattackal and Shashwat Chauhan
July 31 (Reuters) - Most Latin American currencies advanced on Wednesday as the dollar weakened after the U.S. Federal Reserve held rates steady but hinted at a possible policy easing in September, while rising commodity prices also spurred gains.
The greenback =USD weakened globally after the U.S. central bank's policy-setting Federal Open Market Committee left rates unchanged but opened the door to reducing borrowing costs as soon as its Sept. 17-18 meeting.
"While one could make the case that today's FOMC was the first truly 'live' meeting in a while in which rate cuts were under reasonable consideration, the base case is that the Fed delivers that rate cut in September," said Jason Pride, chief of investment strategy and research at Glenmede.
"Assuming inflation continues to cooperate, this could put the Fed on path for a quarter-percentage-point cut at each of the three meetings to close out the year."
A softer stance from the Fed is a welcome signal for emerging markets, which have struggled this year as higher developed market rates and a stronger dollar have weighed on investor appetite for EM assets.
Chile's peso CLP= led gains in the region, rising 1.3% amid a rebound in copper prices. Chile is the world's largest producer of the metal. MET/L
The Andean nation's central bank was expected to cut interest rates by 25 basis points later in the day.
The Colombian peso COP= was up 0.7% against the dollar, benefiting from elevated crude oil prices, one of the country's top exports.
Colombia's central bank cut its benchmark interest rate by 50 basis points to 10.75%, its sixth cut since December. The central bank's technical team also raised its economic growth outlook for the year.
Mexico's peso MXN= advanced 0.8% against the dollar after falling for the last six sessions.
A rebound in commodity prices also lifted Latin American assets, with oil prices picking up from seven-week lows on concerns about escalating conflict in the Middle East after Palestinian militant group Hamas said its leader Ismail Haniyeh was killed in Iran. O/R
The Peruvian sol PEN= and Brazil's real BRL= were the outliers, falling 0.2% and 0.7%, respectively. Brazilian policymakers are expected to hold the central bank's key interest rate at 10.50% for a second time later on Wednesday.
Among equities, MSCI's index for the region .MILA00000PUS was up 1.5%, on track for its best monthly performance so far this year of about a 1% advance.
On the economic data front, Brazil's jobless rate fell to 6.9% in the three months through June, its lowest level in a decade.
Protests in Venezuela over the result of Sunday's presidential election continued, as Group of Seven foreign ministers approved a declaration announcing concerns on the declared results.
HIGHLIGHTS
** High-frequency traders, brokerage firms to face brunt of regulatory curbs on options
** Zelenskiy signs law allowing Ukraine debt payment suspension
** Chile's unemployment rate hit 8.3% in the quarter through June; manufacturing output falls
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1087.19 | 1.45 |
MSCI LatAm .MILA00000PUS | 2201.01 | 1.51 |
Brazil Bovespa .BVSP | 127804.36 | 1.32 |
Mexico IPC .MXX | 53136.84 | 1.55 |
Chile IPSA .SPIPSA | 6467.37 | 0.02 |
Argentina Merval .MERV | 1481853.48 | 4.951 |
Colombia COLCAP .COLCAP | 1348.69 | 1 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.6521 | -0.71 |
Mexico peso MXN= | 18.6012 | 0.8 |
Chile peso CLP= | 941.27 | 1.27 |
Colombia peso COP= | 4051.44 | 0.68 |
Peru sol PEN= | 3.7246 | -0.17 |
Argentina peso (interbank) ARS=RASL | 930.5 | 0.214938205 |
Argentina peso (parallel) ARSB= | 1350 | 2.592592593 |
Reporting by Lisa Mattackal and Shashwat Chauhan in Bengaluru; Editing by David Holmes and Paul Simao
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