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EMERGING MARKETS-Mexican, Colombian pesos lead Latam FX declines as oil prices slide

Credit: REUTERS/Luisa Gonzalez

The pesos of Mexico and Colombia fell the most among Latin American currencies on Monday after oil prices slid and the dollar strengthened, while Chile's peso reversed early declines to rise for the seventh straight day.

By Shreyashi Sanyal

Oct 26 (Reuters) - The pesos of Mexico and Colombia fell the most among Latin American currencies on Monday after oil prices slid and the dollar strengthened, while Chile's peso reversed early declines to rise for the seventh straight day.

Mexico's peso MXN= slipped 0.4%, while Colombia's peso COP= dropped 0.6% as crude prices fell more than 3% as coronavirus cases continued to surge in the United States and Europe. A rise in the safe-have dollar =USD also weighed on Latin American currencies. O/RFRX/

Separately, data showed Mexico's economy grew more slowly than expected in August from July as a recovery from the coronavirus pandemic lost steam.

Emerging markets braced for the outcome of the Nov. 3 U.S. presidential elections, with the Mexican peso being particularly vulnerable to volatile moves.

"When it comes to geopolitics, two main sub-areas stand out (for Mexico): immigration and energy policy," said Gabriela Soni, emerging markets strategist Mexico at UBS.

"Mexico would likely enjoy a better relationship on the former under Biden, while Trump is unlikely to protest against Lopez Obrador's emphasis on fossil fuels."

The Chilean peso CLP=rose 0.2% after falling earlier in the day on growing uncertainty following a landmark vote to replace the country's Pinochet-era constitution on Sunday night with a new charter drafted by its citizens.

Analysts feared the rewriting of the constitution may cause the central bank to adopt a more dovish stance in the medium term.

"The road ahead is full of uncertainties and rewriting the constitution will be a complex process," said Nikhil Sanghani, Latin America economist at Capital Economics.

Sanghani noted the state looked set to play a bigger role in the economy, which while reducing savings and income inequality may help boost aggregate demand, could lead to a misallocation of resources and weaker fiscal discipline.

Brazil's real BRBY, BRL=was flat with focus on a central bank policy meeting later this week. The bank is widely expected to keep the Selic rate on hold at a record low 2.00%.

A central bank survey showed Brazil's 2020 inflation outlook rose to 3%, the 11th week in a row it has risen as a recent spike in food prices continues to intensify short-term inflation pressures.

Investors also awaited a decision from Colombia's central bank policy meeting on Friday.

A Reuters poll of analysts said Colombia's central bank will hold the benchmark interest rate steady, ending seven consecutive months of cuts which took borrowing costs to a historic low.

Key Latin American stock indexes and currencies at 1932 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1129.43

-0.62

MSCI LatAm .MILA00000PUS

1949.51

-0.94

Brazil Bovespa .BVSP

100712.05

-0.54

Mexico IPC .MXX

38191.01

-1.33

Chile IPSA .SPIPSA

3705.07

-2.7

Argentina MerVal .MERV

50461.35

-3.906

Colombia COLCAP .COLCAP

1172.00

-0.28

Currencies

Latest

Daily % change

Brazil real BRBY

5.6229

0.07

Mexico peso MXN=D2

20.9240

-0.27

Chile peso CLP=CL

775.3

0.17

Colombia peso COP=

3812.85

-0.66

Peru sol PEN=PE

3.6037

-0.19

Argentina peso (interbank) ARS=RASL

78.2400

-0.14

Argentina peso (parallel) ARSB=

186

4.84

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum and Richard Chang)

((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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