NEW YORK, June 1 (Reuters) - Latin American currencies rebounded from near one-month lows on Thursday as upbeat factory activity data from China boosted sentiment, while the Mexican peso climbed after the country's central bank struck a hawkish note on interest rates.
- Brazil’s Q1 GDP expands more than expected
- Peru consumer prices fall in May
- Chile economic activity drops in April
The peso gained 0.7%, snapping two straight sessions of losses, after the Bank of Mexico late on Wednesday signaled it would hold the benchmark interest rate at its current all-time high for an extended period of time and raised its 2023 economic growth forecast.
“If Banxico thinks the economy can handle the current interest levels at 11.25%, they do not need to turn dovish and their high interest will attract investors seeking yield,” said Juan Perez, director of trading at Monex USA. “For now, things do indeed look positive for Mexico after the hiccup over the takeover of the private railway.”
Sources on Wednesday told Reuters the Mexican government and conglomerate Grupo Mexico reached an agreement over the government’s occupation of a railway line operated by the firm, which had spooked investors and hurt the Mexican peso’s advance last month. Mexico’s central bank is due to issue minutes of its May monetary policy meeting, when it halted its nearly two year long rate hiking cycle, later in the day.
The Peruvian sol was up 0.4% against the dollar after data showed consumer prices in the Andean country fell to 0.32% in May but remained above a market consensus of 0.25% in a Reuters poll of economists.
A jump in copper prices after a report showing unexpected growth in factory activity in top metals consumer China also boosted the sol as Peru is a leading copper producer. The currency of Chile, which is the world’s biggest copper producer rose 0.4%.
The country’s economic activity index dropped 1.1% in April from the same month last year, the central bank said on Thursday, broadly in line with expectations. The Colombian peso climbed 0.7%. The Brazilian real advanced 0.4% after data showed Latin America’s largest economy rebounded more than expected in the first quarter, powered by a strong farm sector, paving the way for a rosier annual outlook.
MSCI’s Latin American currencies index jumped 1.3%, bouncing off its lowest level since early May hit in the previous session. The dollar index eased as traders pared back their expectations of another Fed rate hike this month after some Fed
officials pointed to a rate hike “skip” in June, while investors also drew comfort from the passage of a deal to suspend the U.S. debt ceiling by the U.S House of Representatives.
Latam stocks also gained 1.7%, tracking the upbeat global mood, with stocks in Chile and Argentina leading the advance. Elsewhere, Hungary expects tax and regulatory changes announced on Thursday to boost demand for government bonds by 1.8 trillion forints ($5.3 billion), as part of wider efforts to keep debt financing costs under control, the economic development minister said.