Brazil's real leads Latam FX lower, Argentina stocks hit record high
MSCI Latam stocks, FX indexes set for weekly declines
Brazil's industrial output rises more than expected in Sept
IMF sees Mexico's economic growth slowing to 1.5% this year
Argentina's central bank trims rates to 35%
MSCI Latam stocks index down 1.9%, FX down 1.2%
Updated at 4:00 p.m. ET
By Johann M Cherian and Ankika Biswas
Nov 1 (Reuters) -A Latin American currencies index slumped to a three-month low onFriday, led by Brazil'sreal amid domestic economic woes and uncertainty around U.S. elections, while Argentina's surprise interest-rate cut pushed its main stock index to a record high.
MSCI's index tracking Latam currencies .MILA00000CUS lost 1.2% against the dollar, set for weekly losses.
Brazil's real BRL= lost 1.4% to hit its lowest level since March 2021 as investors priced in the possibility that the country's governmentwould not be able to meet its annual fiscal framework.
A report said the Brazilian government is now unlikely to present spending cut measures anticipated next week.
Better-than-expected industrial production data for September underscored expectations of increased monetary tightening by the central bank at its meeting next week; however, it did little to support the currency.
Mexico's peso MXN= was also down 1.2% at its lowest level since September 2022, trading above 20-to-the-dollar, with analysts highlighting the peso to be the most sensitive among regional currencies to the U.S. election outcome on Tuesday.
Some investors have increasingly bet that Republican candidate Donald Trump will win, although he is still neck and neck with Democratic Vice President Kamala Harris in several opinionpolls.
The former president has threatened 200% tariffs on auto exports from Latin America's second-largest economy and his policies are perceived by analysts to be inflationary.
"From the tariff side of things, it will strengthen the U.S. dollar and hurt foreign direct investment into the Latam region," Albie Manderson, Deaglo's FX Specialist said.
"Eighty percent of the goods produced in Mexico are imported into the U.S. so tariffs are likely to impact trading relationships. That being said, 60% tariffs on China is likely to be a great opportunity to prop Mexico up in terms of the whole 'near shoring' effect."
The peso also likely weakened by theInternational Monetary Fund estimating Mexico's economic growth will slow to around 1.5% this year before dipping to just 1.3% in 2025.
The currency's depreciation also saw remittances sent to Mexico recording their largest annual drop in eleven years in September.
Meanwhile, Argentina's central bank cut its benchmark interest rate to 35% in a surprise move, boosting local markets and signaling growing optimism by the government that it can tame the country's triple-digit inflation.
The country's main stocks index .MERV jumped 1.6% to hit a record high.
Elsewhere, Colombia's peso COP= slipped 0.1% against the greenback, hitting its lowest level in a year, a day after the local central bank cut the benchmark interest rate to 9.75%.
A recent drop in oil prices and investors pricing in fiscal instability in Colombia has also weighed on the peso.
AReuters poll showed Colombian inflation is expected to continue a downward trend in October, as analysts trimmed their forecasts for 2024, but predicted faster price growth in 2025.
Currencies of copper producers Chile CLP= and Peru EPN= were flat on the day, with both the countries' stock markets closed for public holidays.
On the equities front, an index tracking regional bourses .MILA00000PUS dropped nearly 2% to a near three-month low, ontrack for a weekly decline.
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1122.01 | 0.22 |
MSCI LatAm .MILA00000PUS | 2080.37 | -1.88 |
Brazil Bovespa .BVSP | 128344.78 | -1.06 |
Mexico IPC .MXX | 50740.44 | 0.16 |
Chile IPSA .SPIPSA | 6550.32 | 0.00 |
Argentina Merval .MERV | 1878041.66 | 1.585 |
Colombia COLCAP .COLCAP | 1356.62 | -0.14 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.8695 | -1.43 |
Mexico peso MXN= | 20.2429 | -1.15 |
Chile peso CLP= | 960.8 | 0.03 |
Colombia peso COP= | 4428 | -0.07 |
Peru sol PEN= | 3.773 | 0.00 |
Argentina peso (interbank) ARS=RASL | 990 | 0.10 |
Argentina peso (parallel) ARSB= | 1170 | 1.71 |
Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Andrea Ricci and Diane Craft
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