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Brazil's Mello raises possibility of changing inflation target
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Bolsonaro mulls return to Brazil in coming weeks
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Latam FX up 1.1%, stocks up 2%
(Updates prices, adds comment)
By Bansari Mayur Kamdar and Shubham Batra
Feb 13 (Reuters) - Brazil's real spearheaded gains among
Latin American currencies on Monday as the dollar weakened
ahead of key U.S. inflation data this week that could provide
more clues on the Federal Reserve's monetary policy path.
The MSCI index for Latin American currencies added 1.1%, while broader emerging market (EM) currencies fell 0.1% at 1940 GMT.
The dollar fell 0.3% before Tuesday's U.S.
inflation report, which is expected to show a 0.5% increase in
consumer prices in January from the previous month.
"EMFX this week is at the mercy of the US CPI print," wrote TD Securities strategists in a note.
"We think the only bullish USD scenario is the one where the m/m (month-on-month) print comes in much hotter than expectations."
The real rose 0.9% against the greenback, with investors cautious ahead of a National Monetary Council meeting later this week, which could lead to possible changes in the inflation targets for 2023-24.
"Increasing the inflation targets in the current unsettled fiscal policy environment is not warranted," analysts at Goldman Sachs said in a note. "The upward drift in inflation expectations and potential pressure on the BRL are likely to lead to a higher projected inflation path. This implies that there will be no room to cut the policy rate in the very near-term and at the extreme may even require higher rates in order to align projected inflation to the new targets." Central bank governor Roberto Campos Neto is set to give a high-profile televised interview on Monday on Brazil's monetary policy. The policy and interest rate levels have been questioned by President Luiz Inacio Lula da Silva, who has repeatedly called for higher inflation targets. Lula's term has also been marred by political tensions, after supporters of former President Jair Bolsonaro stormed key government buildings in January. Bolsonaro on Saturday said he plans to return to Brazil in the coming weeks. The currency of top copper producer Chile rose 0.4%. Leading oil exporter Mexico's peso was also up 0.4% against the dollar, while Colombia's peso rose 0.3% as crude prices ticked up. Regional stocks gained 2%, with Argentina's MerVal index up 3.3% and leading gains, while Brazil's Bovespa rose nearly 1%, lifted by financial stocks. Elsewhere, India's Adani Group stocks extended losses even as the conglomerate sought to reassure investors, saying it had strong cashflows and its business plans were fully funded. Key Latin American stock indexes and currencies at 1940 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1014.34 0.07 MSCI LatAm 2246.32 2.03 Brazil Bovespa 108890.83 0.92 Mexico IPC 53104.36 1.19 Chile IPSA 5365.79 -0.49 Argentina MerVal 258205.71 3.325 Colombia COLCAP 1236.96 -0.7 Currencies Latest Daily % change Brazil real 5.1747 0.90 Mexico peso 18.5805 0.35 Chile peso 793.9 0.39 Colombia peso 4785.15 0.29 Peru sol 3.8449 -0.15 Argentina peso 191.6400 -0.58 (interbank) Argentina peso 375 0.53 (parallel) (Reporting by Bansari Mayur Kamdar, Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Kirsten Donovan and Deepa Babington)
