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EMERGING MARKETS-Argentine peso jumps after heavy losses, Mexico central bank cuts rates

Credit: REUTERS/ENRIQUE MARCARIAN

Argentina's peso jumped nearly 5% on Thursday ending a punishing three-day rout, while Mexico's peso rose after the country's central bank cut its key rate for the first time in more than 5 years.

By Susan Mathew

Aug 15 (Reuters) - Argentina's peso jumped nearly 5% on Thursday ending a punishing three-day rout, while Mexico's peso MXN= rose after the country's central bank cut its key rate for the first time in more than 5 years.

The Argentine peso ARS=RASL closed at 57.4 pesos per dollar on signs that the country's president and his main opposition rival were determined to control an economic crisis sparked by a shock primary-election result that wiped out around a quarter of the peso's value.

Opposition presidential candidate Alberto Fernandez trounced center-right President Mauricio Macri in Sunday's vote, which raised fears of a return to protectionist policies if Fernandez were to win the October general elections.

Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman (BBH) pinned the strength in the peso to selling of dollar by some bank's after the central bank established a ceiling for foreign exchange holdings equivalent to 5% of a bank's net worth which is set to take effect on August 20.

Buenos Aires' Merval stock index .MERV rose 4.2%.

In Mexico, the peso rose 0.4% after the country's central bank cut its key rate by 25 basis points to 8%, citing slowing inflation, a sluggish economy, and the recent behavior of the external and domestic yield curves.

There was some knee-jerk rise right after the cut, but markets traded back to earlier levels. Analysts had been more or less split between expecting the bank to hold or cut rates.

The economic indicators argue for a rate cut, "but it's a risky move given emerging markets remain under pressure; and the yield spread is one that supports EM and this is cutting a little bit into that," BBH's Thin said.

Mexican stock .MXX, however, fell. In line with a choppy session on Wall Street, most Latam stock markets were mixed, with Colombia stocks .IGBC rising 0.4%, while those in Brazil stocks .BVSP slipped more than a percent.

Brazil's real BRL= climbed 1.6%, lifted by news that the central bank said it would sell dollars outright in the spot currency market this month for the first time in over a decade in response to rising demand for liquidity.

While most regional currencies rose, helped also by some trade optimism after China showed some willingness to work out a deal even as it has vowed retaliation against U.S. tariffs, Colombia's peso COP= fell 0.4%.

Colombia's gross domestic product grew 3% in the second quarter, the government said on Thursday, buoyed by the retail and financial sectors, but the print came in just below market expectations of 3.1%.

Chile markets were closed for a local holiday.

Key Latin American stock indexes and currencies at 2019 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

963.52

-0.09

MSCI LatAm .MILA00000PUS

2579.24

-0.66

Brazil Bovespa .BVSP

99056.91

-1.2

Mexico IPC .MXX

38571.73

-0.2

Argentina MerVal .MERV

31182.28

4.216

Colombia IGBC .IGBC

12391.30

0.41

Currencies

Latest

Daily % change

Brazil real BRL=

3.9903

1.57

Mexico peso MXN=D2

19.6027

0.37

Colombia peso COP=

3468.8

-0.38

Peru sol PEN=PE

3.391

0.15

Argentina peso (interbank) ARS=RASL

57.1000

5.43

(Reporting by Susan Mathew in Bengaluru; Editing by Sandra Maler)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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