Mexico's peso leads Latin American currencies lower; Turkey keeps rates on hold
Updated at 1515 GMT
Mexican retail sales fall in June
Turkey's central bank holds rates, as expected
JPM: MSCI upgrade could put $1 bln into Argentine stocks
Latin American stocks down 0.9%, currencies down 0.7%
By Lisa Pauline Mattackal
Aug 20 (Reuters) -Latin American stocks and currencies lagged broader emerging markets on Tuesday, retreating as weaker commodity prices and worries about local economic growth offset optimism about potentially lower U.S. interest rates.
An index tracking Latin American currencies against the dollar .MILA00000CUS lost 0.9%, slipping from one-month highs. An index of regional equities .MILA00000PUS fell 0.7%, on pace for its worst day since a global equity market selloff in early August.
Mexico's peso MXN=D3 led Latin American currencies lower, followed closely by the Brazilian real, BRBY with the dollar rising more than 1% against both currencies. FRX/
Elsewhere, Turkey's central bank kept its key interest rate on hold at 50% for a fifth consecutive month, a move widely expected by analysts though policymakers gave few clues about when they could cut rates.
"We think it will take at least a few more months of disinflation before the CBRT (Central Bank of the Republic of Turkey) might begin to lay the groundwork for cutting interest rates," said Nicholas Farr, emerging Europe economist at Capital Economics.
The Turkish lira TRYTOM=D3 strengthened slightly to 33.88 per dollar from 33.892, but remained at a record low, while the country's main stock index .XU100 slipped 0.8%.
In Latin America, Mexican retail sales for June fell 0.5%, slipping 3.9% on an annual basis.
"Going forward, (Mexico's) household consumption of goods and services is likely to face headwinds from high rates, post-election uncertainty, and weakening fiscal impulse," economists at Goldman Sachs said in a note.
Meanwhile, Brazil's finance minister warned about the risks of further tightening monetary policy, even while the head of the country's central bank reiterated policymakers' willingness to raise rates if necessary to tackle inflation.
The comments highlight the dilemma facing many Latin American central banks, as pressure grows to ease interest rates despite weakening currencies and rising inflation.
POTENTIAL ARGENTINA UPGRADE
Declining oil prices also weighed on Latin American assets. Shares of oil companies in the region, such as Colombia's Ecopetrol ECO.CN and Brazil's Petrobras PETR4.SA lost 2.6% and 1%, respectively.
Brazil's Bovespa .BVSP was flat after closing at a record high in the previous session.
The region lagged broader global emerging market stocks .MSCIEF and currencies .MIEM00000CUS, which rose as investors hoped minutes from the U.S. central bank's July 30-31 meeting and Federal Reserve Chair Jerome Powell's speech at the Jackson Hole economic conference in Wyoming on Friday would provide more clues on the start of the policy easing next month.
Meanwhile, JPMorgan said a potential upgrade for Argentina to emerging market status from index provider MSCI could see nearly $1 billion in investor funds pour into the country's stocks.
The Merval stocks index .MERV is set to extend its recent winning streak to nine days, rising 0.9%.
A Reuters poll found analysts see the outlook for Mexico's stocks has been hit by weaker economic prospects and worries about political reforms, while they were more optimistic on Brazilian equities.
HIGHLIGHTS
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** Poland's top court rules central bank head cannot be questioned in parliament
Key Latin American stock indexes and currencies
MSCI Emerging Markets .MSCIEF | 1104.69 | 0.11 |
MSCI LatAm .MILA00000PUS | 2324.95 | -0.89 |
Brazil Bovespa .BVSP | 135822.15 | 0.03 |
Mexico IPC .MXX | 53875.3 | -0.42 |
Chile IPSA .SPIPSA | 6485.59 | 0.42 |
Argentina Merval .MERV | 1671271.95 | 0.857 |
Colombia COLCAP .COLCAP | 1346.34 | -1.08 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4647 | -0.97 |
Mexico peso MXN= | 18.8942 | -1.28 |
Chile peso CLP= | 922.69 | 0.06 |
Colombia peso COP= | 4002.53 | 0.63 |
Peru sol PEN= | 3.7441 | -0.53 |
Argentina peso (interbank) ARS=RASL | 943.5 | 0 |
Argentina peso (parallel) ARSB= | 1345 | 0.371747212 |
Benchmark interest rates in Latin America https://reut.rs/4dOlWHU
Reporting by Lisa Mattackal in Bengaluru; Editing by Paul Simao
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