In the News

EMERGING MARKETS-Brazil’s real falls after central bank holds rates steady, firm dollar weighs

NEW YORK, MAY 4 (Reuters) - Brazil's real fell on Thursday after its central bank held interest rates steady at its sixth consecutive policy meeting and said it was "less likely" to resume hikes, while a firmer dollar weighed on other Latin American currencies.

  • Brazil keeps rates at 13.75%, nods to fiscal policy
  • Argentina’s FX reserves hit 2016 lows on drought impact
  • Colombia sees higher interest rate than market
  • Argentina seeks US, Brazil support for faster IMF payouts

The real eased 0.7% against a strengthening dollar by 10:30 a.m. ET (1430 GMT).

The bank’s rate-setting committee, known as Copom, held its key interest rate at a six-year high of 13.75% on Wednesday and added the government had eased concerns about fiscal policy with proposed new budget rules.

“The central bank did not do its job in sounding hawkish enough to maintain the real steady over the dollar,” said Juan Perez, director of trading at Monex USA in Washington. “Ultimately the move by the Brazilian bank was a semi-dovish hike just like the Fed and in terms of comparing currencies, the dollar seems like a much better return in that situation.”

Activity in Brazil’s services sector expanded to 54.5 in April from 51.8 in March, a purchasing managers’ survey showed. Brazil’s stocks inched 0.3% up, with state-run oil company Petrobras adding 1.2% after its production report.

Embraer SA widened its net loss in the first quarter from a year ago, driving its shares 7.8% lower. Argentina’s peso rose to 463 per dollar in parallel markets.

Argentina is seeking new easing of targets in its $44 billion deal with the International Monetary Fund and faster payouts, and is pushing to get key IMF members the United States and Brazil to support it, government officials said.

Data showed Argentina’s central bank reserves are at their lowest level in almost seven years, as a painful drought stymies key grains exports and a weak peso forces authorities to spend dollars to support it.

Colombia’s peso slipped 0.1% against the dollar. Interest rates will need to be higher than projected by the arket in order to bring persistent inflation down to its long-term target, the technical team of Colombia’s central bank said on Wednesday.

Mexico’s peso shed 0.4% against a stronger greenback. Currencies of copper producers Chile and Peru outperformed regional peers supported by firm red metal prices after the U.S. Federal Reserve signaled a pause on rate hikes on Wednesday.


Reporting by Bansari Mayur Kamdar in Bengaluru; editing by Jonathan Oatis
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