Real poised for biggest quarterly drop since pandemic
Argentina passes economic reform bill
Colombia's central bank cuts interest rate by 50 basis points
Brazil's BTG Pactual buys US-based M.Y. Safra Bank
Latam stocks down 0.6%, FX off 0.5%
Updated at 3:35 p.m. ET/1935 GMT
By Johann M Cherian and Shristi Achar A
June 28 (Reuters) -Brazil's real led declines among Latin American currencies on Friday and was set for its biggest quarterly drop since January 2020 as investors weighed fiscal and political uncertainty in the region's biggest economy.
The currency BRL= depreciated 1.4% and was on track for its biggest monthly drop in nearly two years.
Latest data showed government debt as a share of gross domestic product rose to 76.8% in May from 76.3% the month before, while President Luiz Inacio Lula da Silva launched fresh barbs on the central bank's monetary policy.
"There is a lot of noise in terms of politics, and the unwillingness of the government to cut some expenses in order to bring fiscal expenditure down in the coming years is making investors uneasy," said Andres Abadia, chief Latam economist at Pantheon Macroeconomics.
MSCI's index tracking Latam currencies .MILA00000CUS slipped 0.5% against the dollar and was on track for a loss of over 5% on a monthly basis and over 6% for the quarter.
Political uncertainty following elections in Mexico, a hawkish tilt in Brazilian monetary policy and the U.S. Federal Reserve's delay to kick off interest rate cuts have weighed on sentiment.
Colombia's peso COP= pared gains but was up 0.6% as its central bankcut the benchmark interest rate by 50 basis points to 11.25%, its fifth cut since December, as policymakers looked to boost the economy while keeping a tight grip on inflation.
"Other (emerging markets) as well as G-10 central bankers have exercised lowering rates, so with high borrowing costs still in existence in LATAM, 50 bps isn't outrageous," said Juan Perez, director of trading at Monex USA.
Mexico's peso MXN= bounced 0.6%, breakinga three-daylosing streak.
Copper producer Chile's peso CLP= strengthened 1.4%as prices of the red metal ticked higher. Data showed unemployment in the country at 8.3% in the quarter through May, lower than expectationsof 8.5%.
Yield on Argentina's dollar bond due in 2029 .040114HX1=1M slipped, snapping three sessions of advances. The country's lower house approved economic reform measures proposed by President Javier Milei, giving him his first big legislative win just over six months after taking office.
Separately,data showed Argentina'seconomic activity decreased 1.7% in April from a year ago, its sixth year-on-year drop in a row.
MSCI's index tracking Latam equities .MILA00000PUS slipped 0.6%,and was on track for a monthly loss of 7% and a drop of 14% for the second quarter.
Brazil's Bovespa .BVSP slipped 0.5%,with BTG Pactual BPAC11.SA dropping 4.7% after the investment lender signed definitive documents to buy U.S.-based lender M.Y. Safra Bank.
Key Latin American stock indexes and currencies:
Latest | Daily % change | |
MSCI Emerging Markets .MSCIEF | 1085.04 | 0.29 |
MSCI LatAm .MILA00000PUS | 2168.66 | -0.6 |
Brazil Bovespa .BVSP | 123706.40 | -0.48 |
Mexico IPC .MXX | 52766.20 | 0.87 |
Chile IPSA .SPIPSA | 6431.52 | -1.12 |
Argentina MerVal .MERV | 1616115.87 | -1.195 |
Colombia COLCAP .COLCAP | 1381.38 | 0.34 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.5891 | -1.46 |
Mexico peso MXN=D2 | 18.3110 | 0.59 |
Chile peso CLP=CL | 940.3 | 1.36 |
Colombia peso COP= | 4146.75 | 0.60 |
Peru sol PEN=PE | 3.829 | -0.24 |
Argentina peso (interbank) ARS=RASL | 911.0000 | 0.05 |
Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Alistair Bell and Andrea Ricci
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