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EMERGING MARKETS-Brazil real rises as weak inflation spurs bets against rate cut

Credit: REUTERS/PAULO WHITAKER

Brazil's real gained ground on Tuesday, on track for its best session in two weeks after a glum reading on inflation encouraged bets against further monetary easing by the central bank.

By Susan Mathew and Shreyashi Sanyal

Aug 25 (Reuters) - Brazil's real gained ground on Tuesday, on track for its best session in two weeks after a glum reading on inflation encouraged bets against further monetary easing by the central bank.

The real BRBY rose 1.3%, reversing a fall from earlier in the session.

Data showed the monthly rate of inflation in Brazil slowed in August, according to a mid-month measure, and the annual rate was still slightly lower than expected by economists and below the central bank's 2.5% floor of its target band.

"Recent political noise surrounding the future of finance minister Paulo Guedes, and associated jitters about the direction of fiscal policy, have weighed on the real and bond markets this month," said Edward Glossop, senior emerging markets economist at Capital Economics.

"While the days of Copom (Brazil central bank's rate-setting committee) hiking rates in response to market turmoil seem to be over, it does at least suggest that another rate cut at its next meeting is looking unlikely."

Separately, Brazil's balance of payments position with the rest of the world strengthened in July, with the 12-month current account deficit narrowing to 2% of GDP - the narrowest gap since November, 2018.

But Mexico's peso MXN= rose 0.2% to stay near one-month highs, while the Chilean peso CLP= shed 0.3%, against a weaker dollar. FRX/

Reaffirmation that Washington and Beijing are committed to their Phase 1 trade deal, and that the United States is considering expediting AstraZeneca's COVID-19 vaccine candidate, saw the greenback lose some of its safe-haven appeal. MKTS/GLOB

Stocks in Sao Paulo .BVSP were last down 0.5% as shares of miner Vale VALE3.SAlost 2.6% after pension fund Previ reduced its stake below 5%, and as iron ore prices fell. IRONORE/

The main stock indexes in Mexico .MXX and Chile .SPIPSA fell, while Colombia's COLCAP .COLCAP rose 0.7% to a 14-week high.

Colombia's currency COP= extended declines to a fifth day after ratings agency Fitch on Monday said Colombia could lose its investment grade within two years as the coronavirus pandemic shrinks its economy.

Argentina's peso ARS= fell to new lows ahead of a Friday deadline for creditors to approve its bond restructuring deal. The country's central bank chief on Tuesday said the deal should help reduce the wide gap between the currency's official and black market exchange rates.

Key Latin American stock indexes and currencies at 1922 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1115.61

0.67

MSCI LatAm .MILA00000PUS

1976.41

0.75

Brazil Bovespa .BVSP

101833.12

-0.45

Mexico IPC .MXX

38095.36

0.17

Chile IPSA .SPIPSA

3887.42

-1.89

Argentina MerVal .MERV

46506.54

-0.493

Colombia COLCAP .COLCAP

1231.72

2.2

Currencies

Latest

Daily % change

Brazil real BRBY

5.5220

1.25

Mexico peso MXN=D2

21.9340

0.21

Chile peso CLP=CL

785.7

-0.32

Colombia peso COP=

3863.08

-0.25

Peru sol PEN=PE

3.5858

-0.03

Argentina peso (interbank) ARS=RASL

73.8000

-0.09

Argentina peso (parallel) ARSB=

134

2.24

(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru Editing by Paul Simao and Alistair Bell)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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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