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Strong China data powers rally in Latam markets

(New throughout, updates prices) * Mexican peso hits highest since October 2018 * Chile’s peso gains on higher copper prices * Brazil’s real posts third straight week of losses * Brazilian miner Vale hits over one-year high By Susan Mathew Jan 17 (Reuters) – The Mexican peso scaled a more than one-year high on Thursday as Latin American currencies rallied after stronger-than-expected economic data from China fueled optimism about global growth in the wake of a Sino-U.S. trade truce. Data on Friday showed China ended 2019 on a stronger footing, even as economic growth cooled to its weakest in nearly 30 years, and a surprise acceleration in Chinese industrial output sent copper prices to eight-month highs. Chile, the world’s top producer of the red metal, saw its currency gain 0.3% to 773.14 to the dollar. MSCI’s index of Latam currencies rose 0.4% with Mexico’s peso firming 0.4% to its highest since October 2018 despite a stronger dollar. Brazil’s real gained 0.6% after two days of losses. However, the real is set to post its worst week in more than two months, down about 1.6% in its third straight week of losses. “To a large extent, outflows have been a result of sweeping changes in Brazil’s economy as it adjusts to record-low local interest rates,” said Gustavo Rangel, chief economist, LATAM at ING. Brazil’s central bank had cut interest rates four times last year to an all-time low of 4.5%. “A more supportive BRL environment should emerge gradually throughout the year, but it depends on the eventual confirmation that the monetary easing cycle has concluded and, more importantly, stronger evidence that an activity recovery is firmly under way.” Even though analysts agree with the Brazilian government’s assessment that the local economy has started to look up, a recent spate of weak economic indicators have led to speculation about an interest rate cut in February. In Mexico, the peso added around 0.5% this week. Despite the deterioration in macro fundamentals, carry trade should continue to act as an effective foreign exchange anchor in the nearer term for the peso, ING’s Rangel said. Stocks in the region also rallied, lifted by a record-setting rally on Wall Street. An index of regional equities added 1.3% with heavyweight Brazilian equities rising 1%, powered by a 3% gain for Vale SA . The miner said on Thursday it had halted tailings operations at its Esperança mine to potentially carry out work to improve safety at the site, sending the benchmark Dalian iron ore futures higher. Key Latin American stock indexes and currencies at 1930 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1145.92 0.46 MSCI LatAm 2922.69 1.27 Brazil Bovespa 117930.23 1.05 Mexico IPC 45637.98 0.74 Chile IPSA 4881.06 -0.25 Argentina MerVal 42621.75 0.612 Colombia COLCAP 1652.13 0.26 Currencies Latest Daily % change Brazil real 4.1616 0.66 Mexico peso 18.7015 0.38 Chile peso 772.5 0.39 Colombia peso 3330.75 -0.30 Peru sol 3.321 0.03 Argentina peso 60.0000 -0.03 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Richard Chang)


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