EMERGING MARKETS-Brazil's real rises 1% on commodities boost, cenbank tightening hopes

Credit: REUTERS/Bruno Domingos

By Susan Mathew

Dec 7 (Reuters) - Brazil's real jumped 1.2% to lead gains across Latin American currencies on Tuesday as liquidity-boosting measures by China helped support sentiment, while the Brazilian central bank is seen hiking rates yet again on Wednesday.

A measure of inflation showed prices cooled in Brazil in November, but it was not seen dissuading the central bank from raising the key interest rate by 150 bps to 9.25%, taking this year's hikes to 725 basis points.

"Markets are well-priced for this outcome, but likely expect a continued tone of hawkishness from Brazil's central bank," said Sacha Tihanyi, head of EM strategy at TD Securities.

"BRL is benefiting from substantially increased yield, though not enough currently to make an argument for bullishness outright, or to overcome the fiscal and political challenges facing Brazil."

A similar story is seen playing out in Chile next week. Data showed inflation rose slightly more than expected last month, keeping the monetary policy committee on track to deliver an aggressive monetary tightening by 125bps to 4.00%, according to economists at Capital Economics.

Central banks across several emerging markets have hiked interest rates this year to help curb rising inflation pressures brought about by soaring energy costs and supply-side problems.

Assets of resource-rich Latam also benefited from rising copper and iron ore prices after the Chinese central bank's decision to cut bank reserve requirements supported metal prices on hopes that economic activity in China would pick up. MET/LIRONORE/O/R

China is among the top metal consumers in the world, and improving economic conditions there point toward more demand for commodity exports from Latam.

Oil exporter Colombia's peso COP= added 0.6% as crude prices extended a rebound as concerns over the impact of the Omicron coronavirus variant on global fuel demand eased. O/R

Latam oil majors Ecopetrol ECO.CN and Petrobras PETR4.SA rose more than 1% each.

A Brazilian Senate committee approved a bill that would establish a fuel price stabilization fund aimed at bringing down pump prices, to be financed by a new tax on crude oil exports.

Brazil steelmaker CSN CSNA3.SA rose 2% after announcing a buyback program of up to 30 million shares.

Colombian shares .COLCAP underperformed as conglomerate Grupo ArgosARG.CN slumped more than 5%, extending losses after it ruled out participating in a public acquisition offer for food producer Nutresa launched by Grupo Gilinski.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1236.14

1.83

MSCI LatAm .MILA00000PUS

2118.51

1.47

Brazil Bovespa .BVSP

107672.41

0.76

Mexico IPC .MXX

50817.87

0.42

Chile IPSA .SPIPSA

4394.86

0.6

Argentina MerVal .MERV

89474.78

1.345

Colombia COLCAP .COLCAP

1421.70

-0.63

Currencies

Latest

Daily % change

Brazil real BRBY

5.6264

1.16

Mexico peso MXN=D2

21.0373

0.81

Chile peso CLP=CL

838.4

0.95

Colombia peso COP=

3907.58

0.55

Peru sol PEN=PE

4.0674

0.25

Argentina peso (interbank) ARS=RASL

101.4100

-0.11

(Reporting by Shashank Nayar, Ambar Warrick and Susan Mathew in Bengaluru; Editing by Paul Simao and Dan Grebler)

((Shashank.Nayar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2256;))

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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