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Most Latam currencies slip; rate hike prospects lift Brazil's real

Kitco News

Nov 25 (Reuters) - Latin American currencies lagged emerging market peers on Thursday, with Mexico's peso hit by shrinking economic growth, while in Brazil inflation near 20-year highs kept the currency from losses on speculation about large interest rate hikes.

After a 1% slide on Wednesday on central bank leadership uncertainty, Mexico's peso extended losses to a sixth straight session, down 0.7% to stay near eight-month lows. read more

Seasonally adjusted data on Thursday showed Mexico's economy shrank 0.4% in the third quarter from the previous three-month period, with a sharp contraction in service-sector activity driving the decline. A Reuters poll had forecast a 0.3% contraction. read more

"Mexico's recovery will remain one of the weakest in the region," said Nikhil Sanghani, emerging markets economist at Capital Economics.

Sanghani noted that, even if business support services GDP were unchanged from the second quarter, overall output would have remained well below its pre-pandemic level.

This comes a day after figures showed annual inflation rose faster than expected to 7%, its highest in over a decade, adding pressure on the central bank to tighten policy further.

Volumes were expected to be low, with U.S. Treasury and stock markets shut for the Thanksgiving holiday.

Brazil's real was 0.5% higher, faring better than regional peers as expectations of a large rate hike next month increased after consumer prices rose slightly more than expected. Month-on-month, however, prices fell.

In October the central bank had hiked by 150 basis points, bringing increases this year to 575 basis points. read more

Brazil also attracted $2.49 billion in foreign direct investment in October, below the $4 billion predicted by economists in a Reuters poll.

Stocks in Brazil were lifted by state oil firm Petrobras (PETR4.SA), which rose more than 3% after a sharp increase in its five-year investment plan to $68 billion, a revised dividend policy including quarterly payouts and a more flexible debt target linked to the payments. read more

Elsewhere, Turkey's lira held its ground, up 0.6% after the country's central bank governor said he discussed recent interest rate cuts with bankers at a meeting. [nL1N2SG0IR]

Turkey's central bank signed a memorandum of understanding on Thursday with the central bank of the United Arab Emirates to foster cooperation in central banking. read more

Hungary's forint was set for its best session in four months, pulling away from all-time lows after the country's central bank raised its one-week deposit rate by 40 basis points to 2.9% as it fights rising inflation risks. read more

Key Latin American stock indexes and currencies at 1826 GMT:

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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)
Argentina peso (parallel)
Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru Editing by Jonathan Oatis
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