Credit: REUTERS/GUSTAVO GRAF * Mexican peso extends slide after historic GDP contraction
* Brazil real up, worries remain of fiscal state
* U.S. Federal Reserve sets new inflation strategy
(Adds comments, bullets; updates prices throughout)
By Susan Mathew and Shreyashi Sanyal
Aug 27 (Reuters) - The peso fell on Thursday after minutes
from the Bank of Mexico's latest meeting showed the board is
divided on the path of monetary policy, while other Latin
American currencies edged higher.
Mexico's currency weakened 1% after hitting 11-week
highs in the session, as some board members argued there is less
room for further interest rate cuts and others saying they
should continue. [nL1N2FT1BG]
A day after data showed a historic slide in GDP, numbers on
Thursday showed Mexico posted a record trade surplus in July of
$6.752 billion as exports of automotive and other manufactured
goods gathered steam amid an easing of coronavirus lockdowns.
[nL1N2FT0MQ] [nL1N2FS0FI]
But as imports fell, trade may remain weak the rest of the
year, following the contraction of both the global and Mexican
economies, FX strategists at Citigroup said.
The U.S. Federal Reserve said it will seek to achieve
inflation averaging 2% over time, offsetting below-2% periods
with higher inflation "for some time," and to ensure employment
does not fall short of its maximum level. [nL1N2FT0PR]
The dollar gained ground as analysts broke down the
announcement. [FRX/][nL1N2FT14L]
"What's missing here is an articulation of how exactly we're
going to get higher inflation," said Roberto Perli, head of
Global Policy Research at Cornerstone Macro, Washington.
"Even the statement of longer-run goals just says 'we're
going to use all of our tools.' But it sounds like the tools are
going to be the old tools and those old tools were not
successful in producing higher inflation in the past. So why
should they be successful this time around?"
Brazil's real rose 0.6%.
Sentiment remained fragile in Brazil after President Jair
Bolsonaro rejected a proposal by Economy Minister Paulo Guedes
for a new cash welfare program on Wednesday, highlighting a
split between the two and raising speculation about Guedes'
departure. But the economy ministry said Guedes will not be
announcing his resignation. [nL1N2FS1AJ]
Keeping the welfare program for the next four months will
exact a heavy toll on public finances, said Ronaldo Patah, an
emerging markets strategist at UBS. He also warned that suddenly
stopping the program could trigger a potentially devastating
double-dip recession.
Chile's peso edged higher, while the Argentine peso
dipped.
Argentina's representative told the International Monetary
Fund that the country is seeking a new deal solely to pay back
around $44 billion it had received under an ill-fated stand-by
lending agreement in 2018. [nL1N2FT1A2]
Key Latin American stock indexes and currencies at 1947 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets <.MSCIEF> 1117.13 -0.2
MSCI LatAm <.MILA00000PUS> 1939.63 -0.49
Brazil Bovespa <.BVSP> 100631.01 0
Mexico IPC <.MXX> 37573.30 -0.48
Chile IPSA <.SPIPSA> 3861.56 0
Argentina MerVal <.MERV> 44720.19 -2.425
Colombia COLCAP <.COLCAP> 1228.35 0.08
Currencies Latest Daily %
change
Brazil real 5.5725 0.69
Mexico peso 22.1561 -1.02
Chile peso 784.9 0.11
Colombia peso 3806.78 0.59
Peru sol 3.5628 0.19
Argentina peso (interbank) 73.9300 -0.09
Argentina peso (parallel) 135 1.48
(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
additional reporting by Karen Pierog in New York; Editing by Dan
Grebler)
((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961
144 3740; Twitter: https://twitter.com/s_shreyashi;))
Keywords: EMERGING MARKETS/LATAM (UPDATE 1)
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