UPDATE: Emerging market currencies and Latam stocks
Brazil’s real surged on Wednesday after industrial output in the country fell less than expected, while Latin American stocks surged as major global economies were seen recovering from the coronavirus’ economic rout.
The real rose 2.4% to a near two-month high as industrial production in Brazil fell 18.8% in April at its fastest pace on record due to coronavirus containment measures, but the drop was less than the estimated 29.2% slide.
“It still highlights that GDP will fall dramatically in Q2 – perhaps by 10%-12% quarter on quarter,” said William Jackson, chief emerging markets economist at Capital Economics.
“It will also provide (the monetary policy committee) with plenty of reason to cut interest rates further later this month.”
The real has been one of the worst-performing emerging market currencies this year, but a recent bout of risk appetite has lifted it from record lows, even as pandemic and political woes persist.
Hopes of a broader economic recovery gained momentum as readings showed business activity in the United States and China beginning to recover.
Sao Paulo listed stocks extended gains to a fourth session with financials serving as the biggest boost to the Bovespa.
Most other Latam stocks also rose, tracking Wall Street higher as the U.S. job market was also seen stabilizing.
Chile’s peso rose 1.3% after the country’s central bank said it would gradually scale back its foreign exchange intervention program in the non-deliverable forward (NDF) market amid lower peso volatility.
One-month NDFs on the peso were trading at 770.31 to the dollar by 1902 GMT, compared with the spot rate of 770.30.
The central bank also said it was speaking with its U.S. and Chinese counterparts to broaden the country’s foreign exchange lines.
Argentina’s debt restructuring saga continued. A prominent group of the country’s creditors said its restructuring proposal was in line with an International Monetary Fund assessment of what would be sustainable and called for a deal to help the country avoid a costly default.
Key Latin American stock indexes and currencies:
Source: Reuters
