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Dollar gains on strong U.S. job growth
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Brazil's industrial production drops in 2022
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Chile copper production falls in December
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Latam FX off 2.4%, stocks down 3.1%
(Updates prices, adds details)
By Amruta Khandekar
Feb 3 (Reuters) -
The emerging market currencies index was on track for its biggest daily percentage drop in nearly three years on Friday, with most Latin American currencies at session lows after solid U.S. job growth data boosted the dollar.
MSCI's emerging market currencies index was down 1.1% at 1938 GMT, and was headed for its worst daily performance since March 2020. The U.S. Labor Department's highly anticipated monthly report showed nonfarm payrolls surged by 517,000 jobs in January. Economists in a Reuters poll had forecast a gain of 185,000. The data, which came on the heels of what were seen as largely dovish messages from the Federal Reserve and some other central banks earlier this week, spurred concerns about interest rates staying elevated for longer than expected, boosting the dollar . "It's definitely questioned the need for the Fed to ease policy later in the year, so that understandably has weighed on emerging market currencies," said Chris Turner, global head of markets at ING. "I think a modest correction in emerging market currencies is understandable. I don't think we need to see a really sharp sell-off (going forward), not unless U.S. price pressures pick up." The Latin American currencies index was down 2.4% on Friday, a day after touching multi-year highs. The Brazilian real was down 1.8% against the dollar after Brazilian President Luiz Inacio Lula da Silva issued his latest threat to the autonomy of the country's central bank on Thursday, a day after the central bank floated the possibility of keeping interest rates at a six-year high for longer than expected. Lula's criticism of the central bank also weighed on stocks in Brazil , which fell 1.1%, dragging the Latam stocks index down 3.1%.
Industrial production in Latam's largest economy fell 0.7% in 2022, government statistics agency IBGE said on Friday. The currencies of Mexico and Colombia , both oil exporters, dropped 1.6% and 2.3%, respectively.
Chile's peso fell 2% as data showed total copper production in the country, the world's largest producer of the metal, slumped 0.5% to 495,800 tonnes in December. The Peruvian sol was down 0.7%.
Meanwhile, broader EM stocks fell 1.1% and were on track for their first weekly decline in 2023, bogged down by declines in Chinese equities amid concerns about the country's economic recovery.
In India, financial contagion fears spread as the Adani Group's crisis worsened, with ratings agency Moody's warning the conglomerate may struggle to raise capital and S&P cutting the outlook on two of its businesses. Elsewhere,
the Russian rouble fell back against the U.S. dollar as the finance ministry said it would sell $2.3 billion worth of foreign currency in the month ahead to help plug a deficit in the state budget.
Key Latin American stock indexes and currencies at 1938 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1034.09 -1.1 MSCI LatAm 2245.10 -3.07 Brazil Bovespa 108872.23 -1.15 Mexico IPC 53998.73 0.23 Chile IPSA 5314.63 0.02 Argentina MerVal 241576.37 -2.925 Colombia COLCAP 1266.72 0.53 Currencies Latest Daily % change Brazil real 5.1382 -1.82 Mexico peso 18.9479 -1.60 Chile peso 794.6 -2.04 Colombia peso 4694.75 -2.32 Peru sol 3.8226 -0.73 Argentina peso 188.0000 -0.22 (interbank) Argentina peso 375 0.80 (parallel) (Reporting by Amruta Khandekar in Bengaluru; Editing by Paul Simao and Leslie Adler)
