Brazil's real leads Latam FX lower, but poised for weekly gains
Fed to cut rates by 25 bps in Nov and Dec- POLL
Colombia economy could top 2% in 2024- minister
Latam FX down 0.8%, stocks off 1.5%
By Ankika Biswas
Sept 20 (Reuters) -Most Latin American currencies fell on Friday after recent gains, led by declines in Brazil's real, but were on track for weekly advances on the back of deepened risk appetite owing to a Federal Reserve interest rate cut.
The MSCI index for Latam currencies .MILA00000CUS dropped 0.8% on the day, but was on track for its third straight weekly advance. The stocks index .MILA00000PUS dropped 1.5% and was set for marginal losses.
Among the major currencies, Brazil's real BRL= dropped over 1%, after having gained for six straight days that set it up for its biggest weekly rise since early August.
The real had strengthened sharply on Thursday, after the country's raised its benchmark interest rate by 25 basis points, diverging from the U.S. and other Latin American countries that have already embarked on a policy easing cycle.
Risk appetite has been strong of late, riding on growing prospects of a Federal Reserve rate cut, with the U.S. central bank delivering a larger-than-usual 50-bps cut on Wednesday, that should give EM central banks more room to cut rates themselves.
"Fed easing should be helpful for more net inflows into EM, though conditional on external factors such as US hard landing risks and elections," Citi analysts noted.
"We now expect most EM central banks to cut much less than the US, which could be supportive for EM portfolio debt flows and EMFX vs USD."
A Reuters poll showed the Fed will cut the federal funds rate by 25 basis points in both November and December, according to a strong majority of over 100 economists.
Among others, Colombia's peso COP= weakened 0.2% after rising for three straight days, and having touched a one-week high in early trade.
Colombia's finance ministry sees the Andean country's 2024 economic growth at above 2%, higher than a previous forecast of 1.7%, Finance Minister Ricardo Bonilla said.
The Mexican peso dropped 0.4%, falling for the third day and hitting a one-week low.
Both Peru's sol PEN= and Chile's peso CLP= were largely unchanged, even as copper prices hit a two-month high. Chile's stock market was shut for the third day on account of public holidays.
Over in Central and Eastern Europe, Reuters polls showed the Czech National Bank and the National Bank of Hungary are widely expected to cut interest rates by 25 basis points each next week.
HIGHLIGHTS:
** Brazil to tap ESG bonds to preserve Amazon, forgoing dedicated debt, official says
** Czech president to name economist Seidler to central bank board
** Ghana's VP and former president among 13 candidates for presidency
Key Latin American stock indexes and currencies at 1405 GMT:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1106.5 | 0.58 |
MSCI LatAm .MILA00000PUS | 2244.17 | -1.32 |
Brazil Bovespa .BVSP | 132557.89 | -0.42 |
Mexico IPC .MXX | 52669.66 | -0.47 |
Chile IPSA .SPIPSA | 6323.95 | -0.36 |
Argentina Merval .MERV | 1847053.09 | 0.0 |
Colombia COLCAP .COLCAP | 1315.35 | -0.4 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4738 | -1.1 |
Mexico peso MXN= | 19.3696 | -0.36 |
Chile peso CLP= | 930.36 | 0 |
Colombia peso COP= | 4168.18 | -0.16 |
Peru sol PEN= | 3.7321 | 0.03 |
Argentina peso (interbank) ARS=RASL | 962.5 | 0.051948052 |
Argentina peso (parallel) ARSB= | 1220 | 3.278688525 |
Reporting by Ankika Biswas in Bengaluru; editing by David Evans
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