Latam FX, stocks trend higher ahead of Fed; Mexican peso hits two-week high
Updated at 1513 GMT
Mexican president to talk with Trump on Thursday
Brazil c.bank steps up rate hikes, urges fiscal measures
MSCI's Latam stocks index up 1.7%, FX up 1.4%
Ukraine dollar bonds, GDP warrants extend Trump-win rally
By Johann M Cherian
Nov 7 (Reuters) -Most currencies across major Latin American economies trended higher on Thursday, with Mexico's peso hitting a two-week high against a weakening dollar, as markets priced in a Federal Reserve interest rate cut later in the day.
An MSCI index tracking Latam currencies .MILA00000CUS rose 1.4% to more than a three-week high. The dollar weakened after registering its biggest one-day jump in 26 months in the previous session.
Traders shifted focus to the U.S. Fed's monetary policy decision at 2:00 P.M. ET, which most economists anticipate to be an interest rate cut by 25 basis points, a further tailwind for emerging market currencies.
Mexico's peso MXN= appreciated 1.5% to 19.77 against the U.S. dollar, while local stocks .MXX were flat.
The peso had hit more than two-year lows of 20.8 and the stocks index hit a one-year low on Wednesday after Donald Trump's comeback as U.S. president sparked fears that he could follow through on campaign rhetoric around trade and immigration barriers that would hurt the Mexican economy.
The peso ended Wednesday's choppy session flat, with some analysts pointing to investors having already priced in Trump's win. The currency had lost nearly 21% from April highs in the run-up to Nov. 5.
Newly elected President Claudia Sheinbaum is expected to have a first conversation with Trump on Thursday.
"What happened with the Mexican peso, was that during the day there were no additional pieces of information from Trump regarding his threat to Mexico in terms of tariffs and immigration," Alfredo Coutiño, director for Latin America at Moody's Analytics said.
"The second thing is that it will take time if Donald Trump would like to implement those measures, so it's too early to start panicking... that is why markets reacted in a different way after the initial shock."
Investors also parsed signs of core inflation moderating in the month of October.
Meanwhile, Brazil's real strengthened 0.4%, a day after Copom hiked interest rates by 50 basis-points and left the door open for further increases, while also underscoring the need for fiscal discipline to counter inflation.
Currencies of copper producers Chile CLP= and Peru PEN= firmed 1.2% and 0.6% respectively, tracking a surge in copper prices. Investors also awaited fiscal stimulus announcements from leading consumer China that are expected on Friday.
A poll showed Chile's local central bank is expected to lower its benchmark interest rate by 25 basis points to 5.0% at its next monetary policy meeting in December.
Colombia's peso COP= appreciated 1.7%.
On the equities front, a gauge for bourses in the region .MILA00000PUS gained 1.7% to hit a more than one-week high.
Brazil's Bovespa index .BVSP added 0.4%, while Argentina's MerVal index .MERV rose 0.9%.
Elsewhere, Ukraine's sovereign dollar bonds maturing in 2035 UA289505636= rose 1.5 cents on the dollar, while those papers maturing in 2040 UA130392989= rose 2 cent on the dollar.
The bonds extended a post-U.S. election rally into Thursday on expectations Trump's return to the White House could end the country's war with Russia.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters | ||
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1143.23 | 1 |
MSCI LatAm .MILA00000PUS | 2182.7 | 1.66 |
Brazil Bovespa .BVSP | 130885.21 | 0.42 |
Mexico IPC .MXX | 51757.83 | 0.05 |
Chile IPSA .SPIPSA | 6608.12 | 0.43 |
Argentina Merval .MERV | 1994602.76 | 0.91 |
Colombia COLCAP .COLCAP | 1358.41 | -0.44 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.6535 | 0.45 |
Mexico peso MXN= | 19.7791 | 1.5 |
Chile peso CLP= | 949.1 | 1.17 |
Colombia peso COP= | 4335.1 | 1.74 |
Peru sol PEN= | 3.7519 | 0.64 |
Argentina peso (interbank) ARS=RASL | 994 | -100.00 |
Argentina peso (parallel) ARSB= | 1105 | -100.00 |
Reporting by Johann M Cherian in Bengaluru; editing by Barbara Lewis
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