Latam FX hurt by weak commodity prices, Mexican peso leads losses
EMERGING-MARKETS/LATAM (UPDATE 1):EMERGING MARKETS-Latam FX hurt by weak commodity prices, Mexican peso leads losses
* Brazil's Lula urges Congress to cut spending * Mexico interest-rate decision due on Thu * APEC summit to be hosted by Chile this week * MSCI Latam FX index down 0.3% (Updated at 3:00 p.m. ET) By Pranav Kashyap and Johann M Cherian Nov 11 (Reuters) - Mexico's peso was worst-hit among resource-rich Latin American currencies on Monday, with commodity prices taking a beating as investors remained wary of top consumer China's economic outlook, while pondering the impacts of Donald Trump's forthcoming U.S. presidency. The MSCI index tracking Latam currencies fell 0.3%, with the Mexican peso falling 1.3% against a strong dollar. Following Trump's election victory last week, Mexican and Argentinian assets experienced considerable volatility. Mexico's currency and stocks, that took the sharpest hit in a knee-jerk reaction to the election outcome, were quick to shrug off the steep losses, with analysts suggesting much of the election's impact had already been accounted for. Attention now shifts to the potential candidates for Trump's cabinet, whose appointments could significantly shape the pace and scope of his proposed policies on trade, immigration, and security when he takes office in January. Back in Mexico, investors also awaited Banxico's interest rate decision on Thursday, where it is expected to cut rates by 25 basis-points. The government's 2025 budget proposal is also due later in the week. Mexico's fiscal deficit is projected to reach approximately 5.9% this year, marking its highest level in several decades. President Claudia Sheinbaum reaffirmed the commitment to reducing the deficit to about 3.5% by 2025. Top oil exporter Mexico's peso was also hurt by an around 3% slide in the commodity's prices. Colombia's peso was also marginally lower, with the country's stock market shut for the day. Both oil, copper and iron ore prices slid, primarily due to concerns around China's demand outlook even in the face of stimulus measures to boost its ailing economy. Currencies of both top copper producers- Chile's peso and Peru's sol were down 0.9% and 0.4%, respectively. Chile is preparing to host Asia-Pacific Economic Cooperation leaders this week, with China's President Xi Jinping slated to attend. Meanwhile, Brazil's real dropped 0.6% as President Luiz Inacio Lula da Silva's administration postponed the release of long-awaited spending-containment measures, despite earlier signals of an imminent announcement. Two-week low iron ore prices also weighed. Earlier on Sunday, President Lula da Silva urged Brazil's Congress to implement spending cuts. "Investors will be cautious until they get clear signs on the budget," said Rachel Ziemba, founder of advisory firm Ziemba Insights. "The government will have to send clear signals about its fiscal policy stance, and the market may be waiting to see if the reason the budget was pulled was because it's going to be more conservative or not." The real has faced significant pressure amid growing concerns over the sustainability of the country's public finances, falling nearly 16% so far this year. Among major stocks, Vale SA dropped 3% after brokerage UBS downgraded the miner to "neutral" from "buy". The mining giant was also hurt by weak copper and iron ore prices. Brazilian planemaker Embraer rose nearly 4% after Sweden selected its C-390 Millennium as its next military cargo aircraft. Key Latin American stock indexes and currencies: MSCI Emerging Markets 1124.57 -0.98 MSCI LatAm 2113.15 -0.11 Brazil Bovespa 127781.41 -0.04 Mexico IPC 51534.96 -0.6 Chile IPSA 6538.9 0.29 Argentina Merval 1969388.95 0.25 Colombia COLCAP 1335.33 -1.74 Brazil real 5.7689 -0.55 Mexico peso 20.4347 -1.31 Chile peso 979.1 -0.92 Colombia peso 4358.49 -0.04 Peru sol 3.778 -0.37 Argentina peso (interbank) 998 -0.40 Argentina peso (parallel) 1115 1.79 (Reporting by Pranav Kashyap, Johann M Cherian and Ankika Biswas in Bengaluru Editing by Gareth Jones and Alistair Bell)
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First Published:12 Nov 2024, 02:04 AM IST
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