Real leads Latam currencies higher as Lula adopts fiscal stability stance
Lula backs spending cuts to meet Brazil's fiscal framework
Chilean central bank releases June policy meeting minutes
Kenya's president, IMF chief speak after tax hikes pulled
Latin American stocks up 1.1%, currencies up 1%
Updated at 03:33 p.m. ET/ 1933 GMT
By Johann M Cherian and Shristi Achar A
July 4 (Reuters) -Brazil's real led gains among Latin American currencies on Thursday after President Luiz Inacio Lula da Silva committed his government to fiscal stability, while markets also reacted to the release of central bank policy meeting minutes in Chile.
Brazil's real BRL= jumped 1.5% to 5.48 to the dollar after Lula ordered his economic team to comply with the country's fiscal framework and approved suggestions of spending cuts, the country's finance minister said.
The currency jumped more than 2% on Wednesday, its biggest one-day rise since January, in the run-up to the meeting between the Brazilian leader and his economic team. The real recently suffered losses in which it depreciated to lows of more than two years on concerns of fiscal sustainability in the region's biggest economy.
"Although we expect President Lula will shift to a more pragmatic discourse once he internalizes the consequences of double-digit interest rates, we are concerned this could come too late, as the debt burden escalates exponentially," said Felipe Camargo, senior economist of the global EM team at Oxford Economics.
More broadly, the MSCI index that tracks Latin American currencies .MILA00000CUS strengthened 1% to more than a one-week high against the dollar. Trading was thin as U.S. markets were closed due to the Independence Day holiday.
Market attention is now on the U.S. government's closely watched monthly employment report on Friday, which could provide clues to the Federal Reserve's likely monetary policy path and the outlook for the dollar.
Mexico's peso MXN= added 0.4%. Mexican President-elect Claudia Sheinbaum on Thursday named Omar Garcia Harfuch as security minister.
Traders also parsed Sheinbaum's latest criticism of the Mexican judiciary. Concerns about judicial independence under Sheinbaum's incoming government have pushed the currency to notch its biggest quarterly drop since the COVID-19 pandemic.
Chile's peso CLP= strengthened 0.8% as copper prices were steady. The South American nation is the world's largest producer of the metal.
Minutes from the Chilean central bank's policy meeting last month showed it considered cutting the benchmark interest rate by 50 basis points or keeping it unchanged. The central bank opted for a 25 basis-point reduction to 5.75% at the meeting.
Peru's sol PEN= inched up 0.2% in thin trading. Economy Minister Jose Arista said the copper exporter's economy likely grew between 4.5% and 5% on a year-on-year basis in May, in what would be the second consecutive month of growth.
Colombia's peso COP= added 0.3%.
The MSCI index that tracks regional bourses .MILA00000PUS rose 1.1% to a one-month high, aided mostly by heavy-weight Brazilian equities .BVSP.
Elsewhere, Kenyan President William Ruto spoke with International Monetary Fund chief Kristalina Georgieva after he withdrew proposed tax hikes after deadly protests. The hikes were central to the IMF's $3.6 billion lending programme for the East African nation, according to sources.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1104.23 | 1.09 |
MSCI LatAm .MILA00000PUS | 2233.84 | 1.15 |
Brazil Bovespa .BVSP | 126271.19 | 0.48 |
Mexico IPC .MXX | 52698.89 | -0.18 |
Chile IPSA .SPIPSA | 6525.19 | -0.14 |
Argentina MerVal .MERV | 1614465.83 | 0.683 |
Colombia COLCAP .COLCAP | 1386.03 | 0.33 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.4846 | 1.52 |
Mexico peso MXN=D2 | 18.0857 | 0.41 |
Chile peso CLP=CL | 934.2 | 0.88 |
Colombia peso COP= | 4092.55 | 0.29 |
Peru sol PEN=PE | 3.7792 | 0.26 |
Argentina peso (interbank) ARS=RASL | 913.5000 | 0.11 |
Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Paul Simao and Matthew Lewis
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