In the News

Latam FX drops after dollar pops on hot U.S. jobs report

June 7 (Reuters) -Most Latin American currencies dropped on Friday, after the U.S. dollar jumped in response to robust U.S. jobs data that prompted traders to cut bets that the Federal Reserve will reduce interest rates by September.

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  • Mexico’s annual inflation speeds up less than expected in May
  • Chile’s consumer prices up 0.3% in May, above forecasts
  • Brazil director says premature to talk about hiking rates
  • Russian keeps rates at 16%, holds open prospect of hike
  • Latam FX, stocks poised for third weekly decline

The index for Latam currencies .MILA00000CUS shed 0.8%, on track for its third straight weekly decline, with the dollar jumping 0.6% and heading for a weekly advance.

Data showed U.S. nonfarm payrolls jumped by 272,000 jobs last month, versus 185,000 expected in a Reuters poll. After the report, futures contracts that settle to the Fed’s policy rate implied a 53% chance of a rate cut by September, compared with around 70% odds seen before the report.

The U.S. labor market’s solid performance, despite some recent softening, is set to see the Fed taking its time in deciding when to begin lowering borrowing costs.

“It is a quick strong reaction that pours some cold water on the progress Latam had made this week,” said Juan Perez, director of trading at Monex.

“It’s peculiar to note that while the data lifted the dollar, LATAM is much more resilient. Part of this has to do with markets waking up to NFPs that have surprised before and the central-bank-policy to derive from it as odds of cuts for the Fed go down isn’t anything drastically new.”

The Brazilian real BRL= and Colombian peso COP= fell 0.6% and 0.2%, respectively, while the Chilean peso CLP=CL dropped 1.3%, also hurt by weak copper prices.

Brazil’s central bank director of international affairs, Paulo Picchetti, said it is premature to talk about potentially hiking interest rates at the moment.

Further on the data front, top copper exporter Chile saw exports of the red metal rise 28.1% from a year earlier, while the country’s consumer prices rose 0.3% in May and beat expectations.

The Mexican peso MXN=D2 was flat, on track for it’s steepest decline of over 5% since April 2020, rocked by Sunday’s landslide election victory for the ruling MORENA party and its coalition that raised concerns around any passing of constitutional reforms unopposed.

Data showed Mexico’s annual headline inflation index rose less than expected in May, while the core consumer price index eased.

Meanwhile, local media reported Mexico’s President-elect Claudia Sheinbaum said no decision had been made on a package of constitutional reforms put forward by outgoing President Andres Manuel Lopez Obrador.

Argentina’s year-end inflation estimate came down to 146.4%, some 15 percentage points below the previous forecast, a central bank poll showed, signaling an improving outlook for the embattled economy.

The equities index .MILA000000PUS was down 1.4%, on course for its third straight weekly decline, dragged by Brazilian and Mexican stocks.

Peru’s stock market was closed for a public holiday.

Elsewhere, Russia held rates at 16% for the fourth meeting running, but gave its most hawkish signal yet that a hike may be coming in July and said tight monetary conditions would be required for longer than previously thought.


Reporting by Ankika Biswas in Bengaluru. Editing by Jane Merriman

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