In the News

EMERGING MARKETS-Mexico’s peso weighs on Latam FX, Brazil’s real gains

NEW YORK, MAY 22 (Reuters) - Mexico's peso led most Latam currencies lower on Monday as the dollar firmed with focus on U.S. debt ceiling negotiations, while the Brazilian real rebounded from more than one-week lows hit in the previous session.

  • Mexico’s peso falls for the fifth day
  • Brazil economists lower inflation expectations
  • Bank of Israel hikes interest rates
  • Latam FX is down 0.1%, and stocks fall 0.1%

MSCI’s Latin American currencies index was down 0.1% by 1430 GMT. The dollar held steady as investors waited for a meeting between U.S. President Joe Biden and House Republican Speaker Kevin McCarthy to discuss raising the U.S. debt ceiling after the talks were paused late last week.

The Mexican peso, which has been the best-performing Latam currency so far this year, fell for a fifth straight session, down 0.7% against the greenback to a more than two-week low.

Analysts raised concerns over the recent government takeover of part of a railway in southern Mexico operated by a unit of Grupo Mexico. “(The takeover) is indicative and demonstrative of the true power of the state used to force a negotiation with a private entity,” said Juan Perez, director of trading at Monex USA in Washington.

“If this is a sign of things to come, it will be perceived as a materialization of some of the biggest fears and concerns over AMLO’s (Mexican President Andres Manuel Lopez Obrador) language in the past that aimed at significant government involvement in the country’s biggest industries.”

The peso has declined since the Bank of Mexico paused its nearly two-year-long interest rate hiking cycle last week. While analysts have said the bank could keep rates elevated for some time, potentially supporting the peso, there are risks from a steep economic downturn in the United States.

The Chilean peso and the Peruvian sol slipped 0.3% and 0.2%, respectively, as copper prices declined on concerns over demand from top consumer China. Both countries are leading exporters of the metal. Bucking the trend, Brazil’s real gained 0.6%, bouncing off its lowest level in over a week, which it hit on Friday.

Private economists in Brazil have lowered their expectations for the country’s inflation index, a new central bank survey showed on Monday. They now forecast it to hit 5.80% at the end of this year, down from 6.03% forecast in the previous week.

Brazil’s central bank Governor Roberto Campos Neto said on Monday that inflation expectations in the country remain high, dubbing long-term forecasts stuck around 4% “a problem”.

The Colombian peso gained 0.3% as crude prices edged higher, boosting the currency of the major oil exporter. Stock markets in Colombia were closed for a public holiday. Broader Latam stocks eased 0.1%.

Elsewhere, Sri Lanka’s National Consumer Price Index (NCPI) inflation eased to 33.6% year-on-year in April from 49.2% in March, the statistics department said on Monday.

The Bank of Israel hiked benchmark interest rates to their highest since 2006 on Monday, citing high inflation, and said upcoming data would determine whether it raised them further.


Reporting by Amruta Khandekar; Editing by Kirsten Donovan
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