NEW YORK, MAY 17 (Reuters) - Most Latin American currencies fell against a firm dollar on Wednesday with the Mexican peso spearheading declines, while Turkish assets fell for a third straight day following the presidential election outcome.
- Brazil’s retail sales beat estimates
- Turkey bank stocks, bonds fall for third day
- Ecuador president dissolves legislature
- Latam FX down 0.8%, stocks down 0.3%
MSCI’s index for Latin American currencies was down 0.8% at 1416 GMT, as the dollar strengthened amid ongoing talks to raise the U.S. debt ceiling.
The Mexican peso fell 0.7%, slipping further away from seven-year highs hit earlier this week, a day ahead of a monetary policy decision where the central bank is expected to keep interest rates unchanged.
The Brazilian real was down 0.2% against the dollar, with market focus on a new fuel pricing policy announced by Brazilian state oil company Petrobras on Tuesday.
“The idea is to anchor inflation and I wonder if that will mean indeed that the central bank (of Brazil) will not consider hiking interest rates after refusing to in their last meeting,” said Juan Perez, director of trading at Monex USA in Washington.
Meanwhile, analysts at Moody’s Investors Service said the policy shift was “credit negative” for Petrobras and “could lead to losses if Petrobras does not pass through international oil price volatility to domestic fuel prices.”
Data showed Brazil’s retail sales rose 0.8%, beating market estimates in March. Brazil’s Finance Minister Fernando Haddad emphasized on Wednesday that there is room for interest rate cuts in the country, contrasting with the central bank chief’s acknowledgment of ongoing challenges in achieving disinflation.
The Chilean peso rose 0.2%, while the Colombian peso edged 0.3% lower. The Peruvian sol was up 0.6% against the greenback. Also souring market sentiment on Wednesday were concerns about China’s slow post-COVID recovery, with data on home prices adding to evidence of weak consumer demand.
Still, Latin American currencies and stocks have outperformed broader emerging markets in 2023, hitting multi-year highs several times in recent months.
“Latam is showing that GDP figures are resilient to the post-pandemic and post-war pains that have affected other regions, such as Europe far more severely. In the minds of traders, there is evidence of ongoing growth that makes Latam more attractive as a region,” said Perez.
The rout in Turkey’s bank stocks and dollar denominated bonds extended into the third day, after the main opposition party said it had filed complaints over suspected irregularities at thousands of ballot boxes in Sunday’s landmark elections – in which President Tayyip Erdogan performed better than expected.
Elsewhere, Ecuador’s President Guillermo Lasso dissolved the National Assembly, bringing forward legislative and presidential elections, a day after he presented his defense in an impeachment process against him.
The International Monetary Fund’s First Deputy Managing Director Gita Gopinath said she sees sizeable risks that inflation will remain high or accelerate in many emerging markets and urged central banks to keep monetary policies tight.