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EMERGING MARKETS-Most Latam currencies slip; rate hike prospects lift Brazil's real

Credit: REUTERS/PILAR OLIVARES

Latin American currencies lagged emerging market peers on Thursday, with Mexico's peso hit by shrinking economic growth, while in Brazil inflation near 20-year highs kept the currency from losses on speculation about large interest rate hikes.

By Susan Mathew and Shreyashi Sanyal

Nov 25 (Reuters) - Latin American currencies lagged emerging market peers on Thursday, with Mexico's peso hit by shrinking economic growth, while in Brazil inflation near 20-year highs kept the currency from losses on speculation about large interest rate hikes.

After a 1% slide on Wednesday on central bank leadership uncertainty, Mexico's peso MXN= extended losses to a sixth straight session, down 0.7% to stay near eight-month lows.

Seasonally adjusted data on Thursday showed Mexico's economy shrank 0.4% in the third quarter from the previous three-month period, with a sharp contraction in service-sector activity driving the decline. A Reuters poll had forecast a 0.3% contraction.

"Mexico's recovery will remain one of the weakest in the region," said Nikhil Sanghani, emerging markets economist at Capital Economics.

Sanghani noted that, even if business support services GDP were unchanged from the second quarter, overall output would have remained well below its pre-pandemic level.

This comes a day after figures showed annual inflation rose faster than expected to 7%, its highest in over a decade, adding pressure on the central bank to tighten policy further.

Volumes were expected to be low, with U.S. Treasury and stock markets shut for the Thanksgiving holiday.

Brazil's real BRBY was 0.5% higher, faring better than regional peers as expectations of a large rate hike next month increased after consumer prices rose slightly more than expected. Month-on-month, however, prices fell.

In October the central bank had hiked by 150 basis points, bringing increases this year to 575 basis points.

Brazil also attracted $2.49 billion in foreign direct investment in October, below the $4 billion predicted by economists in a Reuters poll.

Stocks in Brazil were lifted by state oil firm Petrobras PETR4.SA, which rose more than 3% after a sharp increase in its five-year investment plan to $68 billion, a revised dividend policy including quarterly payouts and a more flexible debt target linked to the payments.

Elsewhere, Turkey's lira TRY= held its ground, up 0.6% after the country's central bank governor said he discussed recent interest rate cuts with bankers at a meeting. [nL1N2SG0IR]

Turkey's central bank signed a memorandum of understanding on Thursday with the central bank of the United Arab Emirates to foster cooperation in central banking.

Hungary's forint EURHUF= was set for its best session in four months, pulling away from all-time lows after the country's central bank raised its one-week deposit rate by 40 basis points to 2.9% as it fights rising inflation risks.

Key Latin American stock indexes and currencies at 1826 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1254.39

0.1

MSCI LatAm .MILA00000PUS

2114.17

0.75

Brazil Bovespa .BVSP

105895.62

1.32

Mexico IPC .MXX

50627.78

-0.43

Chile IPSA .SPIPSA

4585.38

-0.95

Argentina MerVal .MERV

84674.40

1.429

Colombia COLCAP .COLCAP

1338.88

0.65

Currencies

Latest

Daily % change

Brazil real BRBY

5.5646

0.52

Mexico peso MXN=D2

21.5750

-0.77

Chile peso CLP=CL

821.1

-0.84

Colombia peso COP=

3975.23

-0.16

Peru sol PEN=PE

4.0244

-0.26

Argentina peso (interbank) ARS=RASL

100.6600

-0.03

Argentina peso (parallel) ARSB=

198

1.26

(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru Editing by Jonathan Oatis)

((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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