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EMERGING MARKETS-Latam FX weakens on growth fears, rate cut expected in Mexico

Credit: REUTERS/EDGARD GARRIDO

Mexico's peso slipped ahead of a central bank meeting on Thursday where policymakers are widely expected to cut rates while the Chilean peso hit a new low as widespread anti-government protests showed no signs of abating.

By Sagarika Jaisinghani and Susan Mathew

Nov 14 (Reuters) - Mexico's peso slipped ahead of a central bank meeting on Thursday where policymakers are widely expected to cut rates while the Chilean peso hit a new low as widespread anti-government protests showed no signs of abating.

An index of Latin American currencies .MILA00000CUS fell for the ninth straight session as a sharp slowdown in China's factory output in October and persistent weakness in Germany's economy sparked fears of sluggish global growth.

The Mexican peso MXX= shed 0.5% in the run up to the meeting of the Bank of Mexico, known as Banxico. Analysts expect it to cut the country's benchmark lending rate for the third time this year.

But a broad rise in longer-dated bond yields over the past month suggests Mexico's economic outlook has improved relatively, easing "pressure on policy makers to cut more than 25 bp today," Morgan Stanley analyst James Lord wrote in a note.

"The recent events in the Andean region that have negatively impacted broader LatAm sentiment could also be a factor prompting a more cautious approach from Banxico."

The Chilean peso CLP= hit an all-time low of 807.60 to the dollar despite measures announced by the central bank to boost liquidity in the financial system after weeks of often violent social unrest.

The currency is on course for six straight sessions of declines, its longest losing streak since Aug 5. But Chile's dollar-denominated bonds strengthened after the report.

"This program (by Chile's central bank) is better than surprise interventions in the foreign exchange market and is likely to soothe, to an extent, concerns regarding further peso depreciation," Credit Suisse analyst Alonso Cervera said.

In Brazil, the real BRL= extended losses for the third session in a row, shrugging off data showing an acceleration in economic activity in September and tracking global currencies lower as weak indicators from major economies reflected the fallout from the Sino-U.S. trade war. FRX/

Investors have been rattled this month as few details have emerged about a potential truce. China said on Thursday it was holding "in-depth" talks with Washington and cancelling tariffs was an important condition for a deal.

The Colombian peso COP= sank to a one-month low ahead of third-quarter GDP figures due later in the day.

A rise in stocks in Brazil .BVSP, Chile .SPIPSA, Argentina .MERV and Colombia .IGBC helped boost the wider index tracking Latin American shares .MILA00000PUS by 0.3%.

Key Latin American stock indexes and currencies at 1449 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1042.27

-0.15

MSCI LatAm .MILA00000PUS

2661.06

0.27

Brazil Bovespa .BVSP

106540.10

0.45

Mexico IPC .MXX

-

-

Chile SPIPSA .SPIPSA

4484.18

1.63

Argentina MerVal .MERV

32700.40

1.112

Colombia IGBC .IGBC

13272.70

0.22

Currencies

Latest

Daily % change

Brazil real BRL=

4.1843

-0.35

Mexico peso MXN=D2

19.4448

-0.49

Chile peso CLP=CL

804.8

-1.01

Colombia peso COP=

3448.93

-0.70

Peru sol PEN=PE

3.3908

-0.08

Argentina peso (interbank) ARS=RASL

59.7100

0.03

(Reporting by Sagarika Jaisinghani and Susan Mathew in Bengaluru; Editing by David Clarke)

((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 0613;))

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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