June 20 (Reuters) - Chile's peso led losses among most Latin American currencies on Tuesday as speculation mounted that the country could lower interest rates soon, and commodity prices fell after a smaller-than-expected cut from China.
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- Chile cenbank flags likely rate cuts in short-term
- Mexico’s retail sales beat expectations
- Brazil Senate committee delays vote on new fiscal rules
- Latam FX is off 0.5%, and stocks are down 1.2%
The peso fell 1.0% by 1900 GMT, extending declines into the third straight session and dragging the broader Latin American currencies index down 0.5%.
Chile’s central bank kept its benchmark interest rate unchanged at 11.25% on Monday but said that if current trends continued, it could cut the rate in the short term. Two central bank board members had voted to reduce the rate at the latest meeting.
The bank on Tuesday also lowered the upper end of its economic growth forecast for 2023. “The Chilean peso will take the slide for sure into the next month from the dovish turn that their central bank has been forced to take,” said Juan Perez, director of trading at Monex.
“While other Latin American economies are above 2.0% growth in GDP, the quarterly average for Chile has been stuck under 1.0%. The frustration has mounted with also items such as copper lowering in price based on fears of lower demand from downwardly revised economic outlooks.”
A dip in copper prices after a smaller-than-expected rate cut from top consumer China to shore up its faltering economic recovery also hurt the currency of the world’s biggest exporter of the metal.
“With housing and other sectors needing immediate domestic remedy, China’s stimulus may not seem like enough to boost hopes of a soft landing for the remainder of the year,” Perez added.
The Mexican peso eased 0.6% against the U.S. dollar, as a slide in crude prices pressured the oil exporter’s currency.
Mexican retail sales rose 1.5% in April from March, the national statistics agency said, beating market expectations.
Mexican President Andres Manuel Lopez Obrador named his current deputy labor minister, Marath Bolanos, to lead the ministry, the latest in a cabinet shuffle prompted by the ruling party’s nascent presidential contest.
The Brazilian real slipped 0.3%, a day after it touched a one-year high.
Brazil’s Senate Economic Affairs Committee has granted the opposition a 24-hour delay on a vote on new fiscal rules considered crucial by the government of President Luiz Inacio Lula da Silva.
Meanwhile, Brazil’s central bank is expected to hold interest rates at their current level on Wednesday.
The Colombian peso bucked the trend with gains of 0.4%, on returning from a holiday.
Latin American currencies have outperformed their emerging market peers this year, boosted by attractive yields due to high-interest rates in the region, though China’s weak post-pandemic recovery has raised expectations its demand for commodities may be subdued.
Argentinian markets were closed.
Elsewhere, the Hungarian forint outperformed its regional peers, gaining 0.5% against the euro, despite the Hungarian central bank’s fresh rate cut as dealers said the currency offered the best carry in central Europe.
Nigerian currency forwards fell to record lows, Refinitiv data showed, mirroring falls on the official spot market where the naira dropped sharply last week.
