EMERGING MARKETS – Real Brazil Prospects Dwindle Among Latam FX; Czech Crown enterprises

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By Susan Mathew, Nov 3 (Reuters) – Latin American currencies fell on Thursday as the dollar rallied on hawkish U.S. Federal Reserve and safe-haven demand, while the Czech koruna outperformed after its central bank promised continued intervention to support the currency. Extending declines from Wednesday when Fed Chairman Jerome Powell said it was “very premature” to consider when the central bank might turn dovish, the 0.4% slide in the Brazilian real led to a decline in latam currencies. Stocks in the region also lost, with Mexican stocks falling 2%, after rebounding 4.3% in the past three sessions. Reflecting a sell-off on Wall Street, other Latin American stock exchanges lost between 0.8% and 1.8%. The rush into safer assets such as the dollar was bolstered after the Bank of England hiked rates to the highest since 1989 and warned Britain faced a long recession. “The Fed, along with other major central banks, should continue to tighten rates through the first quarter of 2023,” said strategists at UBS Global Wealth Management’s chief investment office. “Economic growth will likely continue to slow into the new year and global financial markets are vulnerable to stress as monetary policy continues to tighten,” UBS said. Brazil’s central bank has underscored its growing concern over the effects of lower economic activity on credit risks in the country. Elsewhere, the Czech koruna rose 0.4% after the central bank kept its key rate stable as expected on Thursday after a one-year hike cycle totaling 675 basis points. The bank said it would continue to intervene in foreign exchange markets to stop the excessive weakening of the krone as it seeks to bring down high inflation for three decades. “With inflation approaching a peak and the economy currently contracting, we expect rates to remain unchanged over the coming months,” said Nicholas Farr, emerging Europe economist at Capital Economics. “And as inflation begins to decline, we expect the CNB (Czech National Bank) to be the first central bank in the region to move to rate cuts next year.” In Chile, President Gabriel Boric on Wednesday announced his long-awaited plan to reform the country’s controversial private pension system. “The news is mostly in line with previous proposals. As such, it shouldn’t move the market too much, although Chilean bonds are weaker following moves in U.S. research,” strategists said. CitiResearch. Chilean 10-year bonds were at a four-month high on Wednesday. The Chilean peso fell 0.7%. Main stock indices and currencies in Latin America: Stock indices Last daily change in % MSCI Emerging Markets 859.23 -1.58 MSCI LatAm 2278.90 -1.1 Brazil Bovespa 115457.01 -1.26 Mexico CPI 49865.72 -1.96 Chile IPSA 5160.96 -0.65 Argentina MerVal 148141.10 -0.782 Colombia 3.0 Currencies Last Daily % Change Brazilian Real 5.1380 -0.40 Mexican Peso 19.6794 -0.15 Chilean Peso 948.6 -0.50 Colombian Peso 5007.84 -0.20 Peruvian Sol 3.9363 0.01 Argentine Peso 157.9400 -0.22 (interbank)

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