Sept 22 (Reuters) - Most Latin American currencies bounced on Friday with Mexico's peso outperforming peers after data showing inflation was still above the local central bank's target spurred expectations that interest rate cuts were not in the cards this year.
- Colombia to keep rates at 13.25% in next meeting- poll
- Inflation risks have decreased, says Chile’s central bank
- Mexico’s inflation continues slowdown in early September
- Latam FX up 0.1%, eyes weekly losses
Mexico’s peso climbed 0.6% after data showed headline inflation eased to 4.44% in the first half of September, but was far above the central bank’s target of 3%, fueling expectations that the central bank will hold the key interest rate at its record high level of 11.25%.
Separately, data showed Mexico’s economy, the second largest in Latin America, grew 3.2% in July on an annual basis.
“The Central Bank of Mexico is unlikely to consider any interest rate cuts until the second half of 2024… at this moment there is a steadiness and it makes no sense for them to exercise any loose monetary policy,” Juan Perez, director of trading at Monex said.
MSCI’s gauge of Latin American currencies edged up 0.1% against the dollar at 14:54 GMT. The index is headed for losses of 0.3% at the end of a rollercoaster week marked by concerns about U.S. interest rates staying higher for longer following hawkish signals from the Federal Reserve, while traders braced for more rate cuts from some central banks in Latin America in the coming days.
Chile’s central bank said that inflation risks have “decreased significantly” in minutes of its latest meeting when it cut interest rates by 75 basis points.
“I believe that in the next two meetings, the Chilean central bank is going to be cutting rates potentially and if they do, the peso is going to significantly lose ground,” Perez added.
The Brazilian real gained 0.4% against the dollar, snapping three straight sessions of losses. The currency is set for losses of nearly 1% this week, driven by another 50 basis point rate cut by the central bank.
Colombia’s central bank is expected to hold its benchmark interest rate at 13.25% during the board’s meeting next week as inflation has been falling more slowly than expected, a Reuters poll revealed.
The oil exporter’s currency added 0.2%, also benefiting from rising crude oil prices. The Peruvian sol rose 0.4%, with higher copper prices boosting the currency of the exporter of the red metal. Latin American stocks rose 0.2% on Friday but were set for weekly losses of 1.7%.
