Real leads Latin American currencies higher as Lula adopts fiscal stability stance
Updated at 1500 GMT
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 1.2%, currencies up 1%
By Johann M Cherian
July 4 (Reuters) -Brazil's real led gains among Latin American currenciesafter President Luiz Inacio Lula da Silva committed his governmentto fiscal stability, while markets also reacted to the release of central bank policy meeting minutes in Chile.
Brazil's real BRL= jumped 1.2% to 5.49 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 than2% on Wednesday, its biggest one-dayrise since January, in the run-up to the meeting between the Brazilian leader and his economic team.The real recently had a bout of losses that saw it depreciate to more than two-year lows on concerns of fiscal sustainability in the region's biggest economy.
"Superficially, you can see a small (improvement) after all the damage he's done recently ... but there is a possibility that he might change his mind at some point and that is going to stay in the back of investors minds for a while," said Eduardo Ordonez Bueso, an emerging markets debt portfolio manager at BankInvest.
More broadly, the MSCI index that tracks Latin American currencies .MILA00000CUS strengthened 1% to more than aone-week high against the dollar. Trading wasexpected to be thin as U.S. markets were closed due to the Independence Day holiday.
Markets are turning their focus to the release on Friday of the U.S. government's closely-watched monthly employment report, which could provide clues to the Federal Reserve's likely monetary policy path andthe outlook for the dollar.
Mexico's peso MXN= added 0.7%, with market participants awaiting more announcements on the formationof President-elect Claudia Sheinbaum's cabinet.
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-19pandemic.
Chile's peso CLP= inched up 0.3% 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= climbed 0.7% 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 0.4%.
The MSCI index that tracks regional bourses .MILA00000PUS rose 1.2% to a one-month high, aided mostly by heavy-weight Brazilian equities .BVSP.
The main stock indexes in Mexico .MXX, Colombia .COLCAP and Chile .SPIPSA were largely flat to marginally higher.
Elsewhere, the yield on Kenya's five-year bond KE5YT=RR slipped 13 basis points.
According to sources, 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 Africannation.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1104.28 | 1.09 |
MSCI LatAm .MILA00000PUS | 2236.13 | 1.25 |
Brazil Bovespa .BVSP | 126238.21 | 0.46 |
Mexico IPC .MXX | 52836.27 | 0.08 |
Chile IPSA .SPIPSA | 6547.72 | 0.2 |
Argentina MerVal .MERV | 1608339.35 | 0.301 |
Colombia COLCAP .COLCAP | 1384.78 | 0.24 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.4908 | 1.40 |
Mexico peso MXN=D2 | 18.0586 | 0.56 |
Chile peso CLP=CL | 936.6 | 0.62 |
Colombia peso COP= | 4086.5 | 0.44 |
Peru sol PEN=PE | 3.791 | -0.05 |
Argentina peso (interbank) ARS=RASL | 913.5000 | 0.11 |
Argentina peso (parallel) ARSB= | 1375 | 2.18 |
Reporting by Johann M Cherian in Bengaluru; Editing by Paul Simao
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