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Dollar jumps as Powell flags higher terminal rates
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Mexico Feb inflation seen slowing pace
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Brazil police carry out more raids to probe riots
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Peru starts copper transport as protests ease- minister
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Latam FX down 0.4, stocks slide 1.4%
(New throughout, updates prices, market activity and comments)
By Ankika Biswas and Amruta Khandekar
March 7 (Reuters) - Latin American stocks and currencies
took a hit on Tuesday as Federal Reserve Chair Jerome Powell's
hawkish remarks sent investors scurrying for safer assets like
the U.S. dollar.
The MSCI's index for Latin American currencies dropped 0.4% by 1920 GMT, while stocks in the region declined 1.4%.
The dollar jumped 1.3% after Powell said the U.S. central bank will stay the course until it brings down inflation, adding the
ultimate level of rates
is likely to be higher than anticipated.
His comments boosted expectations of a 50-basis point interest rate hike this month, with traders' bets on such a hike rising to 58%. "The Fed’s message is a negative for emerging markets and means that we may well have to see a return to rate increases in order to maintain spreads versus U.S. rates," said Christian Lawrence, senior market strategist at Rabobank.
"I think that there will not be any rate cuts from the Fed before the middle of next year."
Latin American central banks have
dashed hopes of reversing sharp hikes in their interest rates, amid stubbornly high inflation, expectations of further monetary tightening by the Fed and, in some cases, political risks.
The Colombian peso lost 1.4%, snapping a four-day gaining streak, spearheading losses among Latin American peers.
Chile's peso fell 0.7% on the eve of the Andean nation's inflation data for February. The world's top copper producer's trade surplus slowed down in February from the previous month, while exports of the red metal reached $3.45 billion. The currency of Peru , the second-biggest exporter of copper after Chile, also dipped 0.8%.
Peru's mines are starting to transport copper concentrate to ports for export again after three months of protests snarled shipments, Energy and Mines Minister Oscar Vera said. Mexico's peso fell 0.8%, with inflation expected to remain well above the official target despite slowing in February, fueling expectations of another rate hike by the central bank in March.
The Brazilian real declined 0.5%. The son of former Brazilian President Jair Bolsonaro tweeted that his father would return next week from self-imposed exile in Florida, but deleted the tweet minutes later. Brazil's federal police said they were carrying out new raids as part of a probe into January riots in which Bolsonaro's supporters stormed government buildings. Benchmark stock indexes of Brazil , Mexico and Argentina fell around 1% to 3%, while Colombia's COLCAP bucked the trend with a 0.1% gain. Key Latin American stock indexes and currencies at 1920 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 985.22 -0.86 MSCI LatAm 2198.29 -1.3
Brazil Bovespa 103715.20 -0.94
Mexico IPC 53330.07 -1.1
Chile IPSA 5403.87 -0.44 Argentina MerVal 245663.78 -2.907
Colombia COLCAP 1236.86 0.1 Currencies Latest Daily %
change
Brazil real 5.1870 -0.35
Mexico peso 18.1230 -0.77
Chile peso 803.9 -0.76
Colombia peso 4766.93 -1.39
Peru sol 3.7896 -0.80
Argentina peso (interbank) 199.6600 -0.16 Argentina peso (parallel) 367 1.36 (Reporting by Amruta Khandekar
Editing by Mark Potter and David Gregorio)
