In the News

EMERGING MARKETS-Latam FX gains as dollar retreats, and stocks climb 2%

NEW YORK, MARCH 8 (Reuters) - Latin American currencies gained on Wednesday as the dollar retreated from recent highs touched after hawkish remarks from Federal Reserve Chair Jerome Powell, while stocks in the region rose 2% on a boost from Brazilian shares.

  • Chile’s consumer prices unexpectedly fall in Feb
  • Brazil’s Gol Linhas jumps on Q4 net profit
  • Poland leaves interest rates unchanged
  • Latam FX up 1.0%, stocks gain 2.0%

MSCI’s index of Latin American currencies rose 1.0% at 14:45 GMT, outpacing broader EM currencies which fell 0.2%. The dollar index slid from three-month highs hit after Powell highlighted the central bank’s readiness for larger rate hikes, fanning fears of a steep U.S. recession. Powell will testify again before the House Financial Services Committee at 10:00 a.m. ET (1500 GMT).

“We are still going to get a mixed bag when it comes to USD strength this year,” said Juan Perez, director of trading at Monex USA. “While the U.S. dollar dominance emanates from having a strong economy that can add more in borrowing costs to it, things can also go sour in terms of a hard landing here not matching prosperity elsewhere and eventually, if not rapidly, that can negatively affect the buck.”

The Brazilian real jumped 1.0% in early trade, spearheading gains among regional peers. Investors are also awaiting the presentation of the country’s new fiscal framework by Brazilian Finance Minister Fernando Haddad. “Our assessment is that government understands that out-of-control fiscal spending would be counterproductive, and we expect the new set of fiscal rules to be credible enough to help anchor longer-term fiscal expectations, paving the way for lower rates and sustained growth in the medium to longer term,” said Wilson Ferrarezi, economist at TS Lombard in a note.

Chile’s peso also gained 0.5% after data showed the country’s consumer prices unexpectedly fell in February, offering much-needed relief in the fight against inflation. The Peruvian sol edged up 0.4% while Mexico’s peso gained 0.8% against the greenback. Latam stocks climbed 2.0%, more than erasing their sharp losses from the previous session following Powell’s testimony.

Brazil’s Bovespa index gained 1.3%, helped by a 1.9% jump in shares of state-run oil firm Petrobras. Also helping the index, Brazilian airline Gol Linhas Aereas Inteligentes SA jumped 11.6% after reporting an unexpected fourth quarter net profit which reversed a multi-billion-real loss seen a year earlier. Elsewhere, Poland’s central bank left its main interest rate unchanged at 6.75% on Wednesday, as expected.

Sri Lanka looked set to get a sign-off on a long-awaited $2.9 billion four-year bailout from the International Monetary Fund (IMF) on March 20 after the crisis-hit country secured new financing support from China.


Reporting by Amruta Khandekar, Editing by Nick Zieminski
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