BENGALARU, FEB 9 (Reuters) - The Mexican peso jumped sharply on Thursday after its central bank surprised markets with a bigger-than-expected interest rate hike while Brazil's real hit a one-month low after mixed economic data.
- Mexico annual inflation rate rises slightly in Jan
- Bank of Mexico hikes rates by 50 bps
- Consumer prices in Brazil up 0.53% in Jan
- Latam FX down 0.2%, stocks fall 1.2%
The Mexican peso rose 0.9% against the dollar after its central bank’s five-member governing board unanimously voted to hike the benchmark interest rate by 50 basis points (bps) to 11.00% on Thursday, citing a complex inflation scenario.
Market expectations had been for the central bank to follow in the footsteps of the U.S. Federal Reserve and deliver a 25 bps rate hike.
Data earlier in the day had shown consumer prices in Latin America’s second-largest economy rising slightly more than expected in the year through January.
“MXN upward movement makes perfect sense considering how the Banxico confidence in price growth not going away made them act more hawkishly than the Fed,” said Juan Perez, director of trading at Monex USA.
“This morning’s inflationary figures mean that the central bank will see further need to be watchful and assess if further hikes could be afforded,” Perez said.
The real slid 1.4% against the greenback, dragging the MSCI’s index for Latin American currencies down 0.2% by 1929 GMT.
Brazil’s consumer prices rose 0.53%, slightly less than expected, in January, but the data is unlikely to give the central bank room for monetary easing in the short term. Another survey showed retail sales volumes in Brazil posted in 2022 their smallest annual growth in six years. Brazil’s leftist President Luiz Inacio Lula da Silva traveled to Washington on Thursday, invited to the White House by President Joe Biden in a visit that will focus on support for Brazilian democracy Chile’s peso fell 0.2% against the dollar while the Colombian peso added 0.5%.
Peru’s sol fell 0.1% against the greenback, ahead of its central bank rate decision due at 2300 GMT where it is expected to hike rates by 25 basis points. Peru’s economic outlook is “very uncertain,” but strong economic fundamentals could provide a buffer against prevailing risks, the International Monetary Fund (IMF) said on Thursday after an annual visit to the country.
The Latin American stocks index declined 1.2% as weakness in Brazil’s Bovespa index weighed on the index.
Elsewhere in emerging markets, South Korea’s plans to loosen restrictions on its currency market will raise the won’s status globally and boost business opportunities for local financial firms, a vice finance minister told Reuters.
India’s Adani Group faced fresh concerns after financial index provider MSCI said it was reviewing the free float designation of some group company securities.
Istanbul’s stock exchange operator suspended trading until Feb. 15 and canceled all of Wednesday’s trades following devastating earthquakes that struck Turkey and Syria.
