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Lira retraces some losses, Mexican peso slides almost 2%

Kitco News

Nov 24 (Reuters) - A surging dollar pressured emerging market currencies on Wednesday, with Mexico's peso slipping to more than eight-month lows on central bank uncertainty, while Turkey's beleaguered lira rallied 6%, reversing around half the previous session's slide.

As a bleak reading of German business morale sent the euro to its lowest in more than 16-months, the dollar resumed its rally, bolstered further by data showing U.S. weekly jobless claims hit a 52-year low. read more

The lira recovered to 12.1 per dollar after hitting a record low of 13.45 on Tuesday driven by fears of continued policy missteps as President Tayyip Erdogan pressures the central bank to cuts rates despite surging inflation.

"We're probably going to continue to see downward pressure on the lira heading into year end," said Christian Lawrence, senior FX and rates strategist with Rabobank. "It's not going to be at the pace we saw over recent days," he said, attributing the day's moves to profit taking.

Lawrence does not see Turkish interest rates being cut further as signaled by the central bank and expects the rates to be held or "if anything, raised".

Mexico's peso slipped 1.9% to 21.60 per dollar after President Andres Manuel Lopez Obrador pulled his nomination for Arturo Herrera to head the central bank next year and said he would propose senior finance ministry official Victoria Rodriguez for the post. read more

The fact that Rodriguez has already worked in the public sector should help market perception, said Wilson Ferrarezi, Brazil economist at TS Lombard. But her stance remains to be seen given the president was seen nominating someone with a more dovish bias, and the sudden change adds to volatility, he said.

"The base case is still for more rate hikes into the first quarter of 2022, specially in the context of rising inflation in Mexico, (U.S. Federal Reserve) tapering and debates over rate hikes in the U.S. as well," he said.

Mexican annual inflation accelerated faster than expected in the first half of November to more than 7%, the highest rate in over 20 years, adding to pressure on the central bank to tighten borrowing costs further.

Falling oil prices also weighed on the peso, as they did on exporter Colombia's currency which slipped 0.6% to more than three-month lows.

Chile's peso continued it's outperformance, up 0.5% with higher copper lending support.

Brazil's consumer confidence index hitting a seven-month low in November kept the real from making significant gains.

Emerging market stocks (.MSCIEF) gave up meager gains to slip for a sixth straight session, down 0.4%. Russian stocks (.IMOEX) erased early gains to trade 0.5% lower, while Brazil's Bovespa index (.BVSP) was led lower by consumer stocks.

Key Latin American stock indexes and currencies at 1503 GMT:

Stock indexes
Daily % change
MSCI Emerging Markets (.MSCIEF)
MSCI LatAm (.MILA00000PUS)
Brazil Bovespa (.BVSP)
Mexico IPC (.MXX)
Argentina MerVal (.MERV)
Daily % change
Brazil real
Mexico peso
Chile peso
Colombia peso
Peru sol
Argentina peso (interbank)
Reporting by Susan Mathew in Bengaluru; Editing by Kirsten Donovan
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