EMERGING MARKETS-Mexican Peso leads Latam FX losses, Brazil’s real pushes
Band Ambar Warrick
August 25 (Reuters) – The Mexican peso led the losses on Latin American currencies on Wednesday as second-quarter GDP data fell short of expectations and raised fears of slower growth. The Brazilian real has rebounded again after suffering significant losses in recent sessions.
The peso MXN = fell 0.3% as second-quarter economic growth stood at 1.5%, slightly below expectations of 1.7%. The Mexican economy also contracted in June compared to May.
The reading, coupled with an increase in coronavirus infections, has made the peso less attractive than some of its high-yield emerging market peers. A drop in Mexican inflation during the first half of August also reduced the chances of an interest rate hike by the central bank.
“Even before the current crisis, the country’s economy was under pressure, contracting in six of the eight quarters leading up to the pandemic,” said Matthew Ryan, senior market analyst at Ebury.
“The recovery, however, has not been as rapid as that of many peers in Mexico. We believe this is in part a consequence of the government’s reluctance to increase budget spending.”
Mexican stocks .MXX rose 0.5%, extending gains after hitting a record high on Tuesday. Industrials and sectors most likely to benefit from an economic recovery were the main drivers of the benchmark.
But analysts have questioned whether the gains will last, especially due to late vaccinations in the country.
“The country’s stock market will likely continue to benefit from continued abundant global liquidity and new rounds of US budget spending,” said Alejo Czerwonko, chief investment officer, Emerging Markets Americas, UBS Global Wealth Management.
“But Mexico’s ability to repeat such a strong outperformance against other emerging markets is in doubt, and we believe a neutral stance is more appropriate now.”
The real one from Brazil BRBY, BRL = rose 1% after jumping nearly 3% on Tuesday, as a rise in inflation in August signaled more hawkish moves by the central bank.
The real has rebounded from steep losses in recent sessions as investors look to the progress the government has made to improve its fiscal position after a sharp increase in spending during the pandemic.
The data also showed that Brazil posted a much larger-than-expected current account deficit in July.
Other Latam currencies fell as concerns over increasing COVID-19 cases persisted from last week. The dollar was slightly supported by demand for safe-haven securities. USD /
Latin American Stock Indices and Currencies:
% daily change
MSCI Emerging Markets .MSCIEF
MSCI Latin America .MILA00000PUS
Brazil Bovespa .BVSP
Mexico CPI .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
% daily change
Real brazil BRBY
mexican peso MXN = D2
Chilean peso CLP =
Colombian peso COP =
Peru soil PEN = PE
Argentine peso (interbank) ARS = RASL
(Reporting by Ambar Warrick; editing by Kirsten Donovan; editing by Grant McCool)
(([email protected]; + 91-80-6182-2837;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.