Latam FX slip as investors weigh possible Trump second term, weak commodity prices
Updated at 1455 GMT
Brazil's economic activity up in May despite flood tragedy
Mexico's Mejia says rate cuts should be gradual
Peru cenbank sees economy growing 4% in second quarter
Argentina to sell dollars on parallel market
Stocks off 0.2%, FX down 0.1%
By Johann M Cherian
July 15 (Reuters) -Mexico's peso led declines across Latin American currencies on Monday, as investor expectations on the likelihood of a second term for former U.S. President Donald Trump and declines in commodity prices aided the risk-off mood.
The currency of the second-largest economy in the region, Mexico MXN= depreciated 1.2%, as Donald Trump cemented his hold on his Republican Party at its 2024 convention this week, having survived an assassination attempt.
The former U.S. President's policies on trade protectionism and against illegal migration are seen as negative for emerging markets.
"The most exposed country in terms of risks relative to the current condition is Mexico, given issues on trade where Mexico has overtaken China in terms of bilateral trade balance and the issue of immigration on southern border as well as security," said Olga Yangol, head of EM research & strategy at Credit Agricole.
Elsewhere, Banxico Deputy Governor Omar Mejia's comments on gradual adjustments to the local benchmark interest rate did little to support the currency, as per a report.
More broadly, MSCI's index tracking Latin American currencies .MILA00000CUS eased 0.1%, from a nearly 3% gain over the previous two weeks. Still, the currencies are down year-to-date as uncertainties concerning monetary policy, fiscal stability and political developments loom.
Brazil's real BRL= slipped 0.4%. Economic activity in the region's largest economy increased by a seasonally adjusted 0.25% in May from the previous month, showing resilience despite severe flooding in the country's southernmost state during the period.
The world's largest copper exporter, Chile's peso CLP= weakened 0.6%, as prices of the red metal lost its shine after economic growth data from top consumer China weighed on demand outlook. MET/L
Oil exporter Colombia's COP= peso weakened 0.9%, as crude prices slipped. O/R
Peru's sol PEN= inched up 0.2% in thin trades, after touching nearly two-month highs in the previous session. The local central bank said it expects second-quarter annualized Gross Domestic Product (GDP) growth to land around 4% and around 5% for the month of May, returning to growth after the economy fell into a technical recession last year.
On the equities front, MSCI's index tracking local bourses .MILA00000PUS slipped 0.5%, with Mexican stocks .MXX down 0.3%.
Brazil's Bovespa was .BVSP flat, with CCR CCRO3.SA down 1.2%, after a report said the Sao Paulo state government will revoke the silver line subway concession belonging to infrastructure firm.
Argentina's peso ARSB= strengthened nearly 2% in parallel trade, while the MerVal index .MERV dropped 4.3%. The Javier Milei-led government said the local central bank will start selling U.S. dollars in the country's parallel foreign exchange markets in an effort to combat inflation and freeze the country's money supply.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1120.11 | -0.31 |
MSCI LatAm .MILA00000PUS | 2320.03 | -0.1 |
Brazil Bovespa .BVSP | 128909.91 | 0.01 |
Mexico IPC .MXX | 54744.31 | -0.38 |
Chile IPSA .SPIPSA | 6551.18 | 0.02 |
Argentina MerVal .MERV | 1640257.22 | -4.392 |
Colombia COLCAP .COLCAP | 1375.02 | 0.07 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 5.4494 | -0.35 |
Mexico peso MXN=D2 | 17.8180 | -1.19 |
Chile peso CLP=CL | 910.3 | -0.54 |
Colombia peso COP= | 3956.1 | -0.73 |
Peru sol PEN=PE | 3.7339 | -0.56 |
Argentina peso (interbank) ARS=RASL | 921.5000 | -0.22 |
Argentina peso (parallel) ARSB= | 1420 | 5.63 |
Reporting by Johann M Cherian in Bengaluru; editing by David Evans
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