By Susan Mathew and Ambar Warrick
Oct 29 (Reuters) – Colombia’s peso recouped early losses on Friday after the central bank raised interest rates, while Mexico’s peso headed for its worst day in a month after the country’s economy shrank in the third quarter.
The Colombian currency COP= rose 0.3% from a more-than three-week low, after the central bank raised rates by 50 basis points to 2.50%, amid rising inflation levels in the country.
The increase marked a second consecutive month the board has raised the rate, although members remained divided over the pace of hikes. The bank also raised its economic growth outlook for the year.
Rate hikes have been a common trend across emerging markets this year, as more economies struggle to cope with rising inflation.
“Financial conditions in Latin America have tightened sharply this year, most notably in Brazil and Chile, on the back of aggressive monetary tightening and growing political and/or fiscal risks,” Capital Economics said in a note.
“With these factors likely to persist, tight financial conditions add to growing headwinds facing recoveries in the region.”
Mexico’s peso MXN= sank 1.1% after data showed the country’s economy shrank in the third quarter, its first contraction since a sharp rebound from pandemic-driven lows.
Still, the currency was set for mild gains in October. Mexican Deputy Finance Minister Gabriel Yorio reiterated the government’s economic growth forecast of 6.3% this year.
Peru’s sol PEN= was the best performing Latin American currency in October, up 3.4% as moderate signals from the newly elected leftist government calmed some fears of disruptive market policies.
On the other hand, Brazil’s real BRBY severely lagged its peers with a 3.6% loss, as concerns over rising inflation were compounded by signals from the government that it intended to breach its fiscal spending cap.
Chile’s peso CLP= slipped 1.1% as data showed copper production, a major export, fell 6.9% year on year in September amid some shutdowns in the sector.
Concerns over waning Chinese demand for the red metal have also stung the peso in recent sessions.
Brazil’s Petrobras PETR4.SA beat quarterly profit expectations as rising crude prices helped its margins. But Brazilian President Jair Bolsonaro said the company is too profitable, criticizing its policy of pricing domestic fuel according to global rates.
Petrobras shares fell 6%.
Brazilian miner Vale VALE3.SA sank 2.5% after third-quarter net profit came in significantly below analysts’ forecasts, while a 60% sequential drop in quarterly net income pushed steelmaker Usiminas USIM5.SA 5.7% lower.
Key Latin American stock indexes and currencies:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
(Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell and Marguerita Choy)
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