Emerging currencies: Latam currencies weaken
Brazil’s real slid to a one-month low on Monday, leading a decline across major currencies in Latin America, while Sao Paulo-listed stocks ended a six-session losing streak amid a rally in global markets fueled by trade optimism.
Extending losses to a third session, the real weakened 1% against a steady dollar, and the currency of oil exporter Colombia dropped 0.2% as crude prices slipped, while those of Mexico and Chile traded flat.
Broader emerging market currencies rallied on hopes that the United states and China would ink a trade deal this week, a moves towards ending a trade war that has roiled markets for 18 months.
Prolonged economic weakness in Latin America weighed on the region’s currencies and an easing cycle in Mexico and Brazil saw the central banks cut interest rates four times last year.
While analysts debate the possibility of continued easing in Brazil this year as rates reached historic lows, the Mexican central bank is expected to keep cutting rates as inflation slipped further below the bank’s target.
Latest data showed Mexican gross fixed investment fell 1.5% in October from the previous month.
“We do have some domestic factors in Latam that have weighed somewhat and there is a little bit of a view that this trade deal, at the margin, is benefiting other regions more than Latam,” said Christian Lawrence, senior market strategist at Rabobank in New York.
While Wall Street touched record highs on trade optimism and earnings, regional stocks painted a mixed picture.
Brazil’s benchmark Bovespa index added 1.4%, after losing 2.6% over the last six sessions. The rally was broad-based, led by financials and material stocks, but declines in energy shares kept gains in check.
Marking their fourth straight session in the black, Mexican shares rose 0.5% with conglomerate Orbia Advance Corporation jumping up to 14% on reports that several companies are interested in buying its vinyl business.
Colombian equities fell for the third time in four sessions, while Argentine shares shed 1.6% after two day of gains.