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EMERGING MARKETS-Latam currencies weaken over growth worries, stocks rise

Credit: REUTERS/JOSE LUIS GONZALEZ

Latin American currencies weakened against a firm dollar on Wednesday as investors shied away from riskier bets amid global growth worries, while strong demand for oil helped equities in the region rise.

By Agamoni Ghosh

Aug 28 (Reuters) - Latin American currencies weakened against a firm dollar on Wednesday as investors shied away from riskier bets amid global growth worries, while strong demand for oil helped equities in the region rise.

Adding to a bout of data signaling global slowdown, Mexico's central bank, Banxico, reduced its projected growth for Latin America's second-largest economy for the fifth time in a row for 2019 and expects a smaller expansion in 2020.

Banxico also cut its inflation forecast for the end of 2019 to 3.2% from 3.7% on the back of growth risks arising from global trade disputes and struggling state oil firm Pemex, whose ratings downgrade poses a big threat to the sovereign debt.

The Mexican peso MXN= shed 0.4%.

The Argentine peso ARS= closed 3% lower, but managed to pare some earlier losses as the central bank sold $262 million of its reserves in five interventions aimed at controlling the currency's fall.

Worries about Argentina's ability to meet its dollar-denominated debt obligations have increased since the peso got trounced by political uncertainty after an Aug. 11 primary election.

The real BRL= hovered near 2019 lows. Central bank president Roberto Campos Neto said on Wednesday that inflation in Brazil, a country that once suffered from hyperinflation, is on a downward path.

The central bank waded into the foreign exchange market on Tuesday in a rare sale of dollars after the real slumped to its weakest level against the greenback in almost a year and within sight of its all-time low.

The real has lost about 8% of its value against the dollar in August, under pressure from worries surrounding global trade and economic growth, with mounting expectations for the central bank to further cut interest rates.

"The weakness of the economy makes a 50 bp cut in Selic rate at the next central bank meeting in September increasingly likely," said analysts from Capital Economics in a note.

A jump in oil prices supported most stock markets, with Brazil's Bovespa .BVSP and Colombian equities .IGBC gaining between 06% and 0.8%.

Key Latin American stock indexes and currencies at 1930 GMT

Stock indexes

Latest

daily % change

MSCI Emerging Markets .MSCIEF

965.33

0.08

MSCI LatAm .MILA00000PUS

2505.73

0.77

Brazil Bovespa .BVSP

98081.48

0.83

Mexico IPC .MXX

40989.16

0.84

Chile IPSA .SPIPSA

4600.19

-0.1

Argentina MerVal .MERV

25356.48

2.981

Colombia IGBC .IGBC

12467.15

0.6

Currencies

Latest

daily % change

Brazil real BRL=

4.1563

-0.53

Mexico peso MXN=

20.0775

-0.40

Chile peso CLP=CL

722.3

0.03

Colombia peso COP=

3473.05

-0.17

Peru sol PEN=PE

3.401

-0.24

Argentina peso (interbank) ARS=

57.8000

-3.10

(Reporting by Agamoni Ghosh in Bengaluru Editing by Chris Reese)

((Agamoni.Ghosh@thomsonreuters.com; +918067491130; Reuters Messaging: Agamoni.Ghosh.thomsonreuters.com@reuters.net))

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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