Dollar strength hits EM FX; Colombian peso jumps after rate cut
Colombia’s central bank cuts interest rates by 50 basis points Mexico’s consumer prices rise 0.27% in early March
Argentina dollar bonds hit record highs as Milei rally powers on
FX subdued, eyes weakest weekly showing in four
Latam FX down 0.3%, stocks down 0.9%
Updated at 3:30pm ET/1930 GMT
By Ankika Biswas and Lisa Pauline Mattackal
March 22 (Reuters) – Emerging market currencies slid on Friday, eyeing their worst week since January as a risingdollar weighed, though Colombia’s peso outshone peers after its central bank reduced interest rates and increased forecasts for economic growth.
The MSCI index tracking Latam currencies .MILA00000CUS shed 0.4% on the day and 0.2% for the week, its first week in the red since the start of March.
Colombia’s peso bucked the trend, rising 0.4% after the central bank cut benchmark interest rates by 50 basis points as expected, but upped forecasts for growth.
The index tracking global emerging market currencies .MIEM00000CUS dropped 0.7% in its worst week since January asthe dollar headed for its strongest week in ten and the Chinese yuan fell.
Those decisions close a busy week for markets that includedJapan’s historic rate hike and Switzerland’s surprise rate cut, while the U.S. Federal Reserve stuck to its projections for three rate cuts in 2024.
“Borrowing costs will remain elevated in real terms … in the U.S. and Europe, this and tightening fiscal policy will hinder domestic demand in advanced economies, domestic demand in China and EM ex-China will remain very tepid, with risks skewed to the downside,” analysts at BCA Research wrote.
Colombia’s decision comes onthe heels of Mexico’s first rate cut since 2021 and Brazil’s 50-bp rate cut this week.
Brazil’s real BRL=, Chile’s peso CLP=CL and Peru’s sol PEN=PE fell between 0.3% and0.8%against the greenback.
Meanwhile, Argentina’s dollar-denominated international bonds rallied as investors continued to bet that President Javier Milei will fulfill campaign promises to reform the struggling economy.
Data showed Mexico’s consumer prices rose alongside expectations in the first half of March, while core inflation beat estimates, reinforcing bets of slow-paced upcoming rate cuts. Another data set showed the country’s economy shrank 0.6% in January from December and expanded 2% year-on-year.
Mexico’s peso MXN=D2 fell 0.2%.
The Latin American stocks gauge .MILA00000PUS lost 0.9% in its worst day in two weeks, led by a nearly 1% loss in Brazilian stocks. .BVSP
Russia’s central bankheld rates steady at 16%, warning inflationary pressure remained high and tight monetary conditions would be maintained for a long time to try to return inflation to the 4% target.
The rouble RUBUTSTN=MCX weakened towards the 93-per-dollar mark.
“It’s looking more likely that the central bank might start an easing cycle in the third quarter once inflation has clearly reached a peak,” said Liam Peach, senior emerging markets economist, Capital Economics.
Key Latin American stock indexes and currencies at 1930 GMT:
|
Latest |
Daily % change |
|
|
MSCI Emerging Markets .MSCIEF |
1038.15 |
-0.97 |
|
MSCI LatAm .MILA00000PUS |
2505.44 |
-0.92 |
|
Brazil Bovespa .BVSP |
126957.44 |
-0.94 |
|
Mexico IPC .MXX |
56579.07 |
-0.14 |
|
Chile IPSA .SPIPSA |
6515.90 |
0.46 |
|
Argentina MerVal .MERV |
1222455.42 |
-0.248 |
|
Colombia COLCAP .COLCAP |
1324.01 |
0.18 |
|
Currencies |
Latest |
Daily % change |
|
Brazil real BRBY |
4.9997 |
-0.42 |
|
Mexico peso MXN=D2 |
16.7646 |
-0.18 |
|
Chile peso CLP=CL |
980.6 |
-0.80 |
|
Colombia peso COP= |
3891.1 |
0.37 |
|
Peru sol PEN=PE |
3.6867 |
-0.30 |
|
Argentina peso (interbank) ARS=RASL |
854.5000 |
0.00 |
|
Argentina peso (parallel) ARSB= |
1000 |
3.00 |
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; editing by Deepa Babington and Nick Macfie
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