NEW YORK, Nov 9 (Reuters) - Most Latin America currencies dipped on Wednesday as the dollar regained its strength amid a tightly contested U.S. midterm election race and ahead of inflation data, while the zloty extended losses as the Polish central bank kept its interest rates unchanged.
- U.S. election outcome, inflation data awaited
- Polish cenbank holds rate steady at 6.75%
- Mexican inflation slows ahead of cenbank decision
As per latest developments, U.S. Republicans made modest gains, but Democrats performed better than expected, leaving control of Congress and the future of President Joe Biden’s agenda unclear on Wednesday.
The MSCI’s Latin American currency index lost 0.6%, as the dollar gained 0.9%. Thursday’s U.S. inflation print for October will be crucial in making bets on whether the Federal Reserve will temper its stance as investors fret about a likely recession.
“If Democrats are going to continue to be around and help the president’s agenda, you are going to continue to have spending that is going to be very pro dollar,” said Juan Perez, director of trading at Monex USA in Washington.
Among other major emerging market currencies, the Polish zloty slipped 0.6%, as the country’s central bank held its main interest rates steady at 6.75%, extending a pause in monetary tightening as the largest economy in the European Union’s eastern wing braces for an economic slowdown.
Brazil’s real fell 0.6% with additional uncertainty as leftist President-elect Luiz Inacio Lula da Silva’s Cabinet picks were awaited, while doubts rose that his potential fiscal plans could breach the constitutional spending cap.
Mexico’s peso slipped 0.4% after data showed inflation slowed to 8.41% in the 12 months through October, coming in slightly below forecasts on the eve of the central bank’s next monetary policy meeting.
Among Latin American stocks, Brazil’s Bovespa index, slid over 2%, dragged lower by shares of petrochemical producer Braskem and lender Bradesco after each reported a quarterly loss. Brazilian steelmaker Gerdau SA gained 5%, despite weaker results, likely driven by the company announcing a fresh dividend payout, which came as a surprise for some analysts.
Separately, Peru’s prime minister on Tuesday challenged the legislature to a confidence vote, raising tensions once again between state powers in the Andean nation, which has been roiled by political infighting for years. The Peruvian sol slipped 0.3% ahead of a central bank interest rate decision on Thursday.
