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Brazil's Haddad sees room for rate cut
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Peru declares state of emergency post cyclone
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Latam FX down 2.2%, stocks lose 2.65%
(Updates prices throughout; adds details, comments)
By Shreyashi Sanyal and Ankika Biswas
March 13 (Reuters) - Latin American currencies on Monday
were set for their steepest one-day fall in nine months as fears
of contagion risks from Silicon Valley Bank's (SVB) failure
rippled across financial markets, with the Mexican peso
spearheading losses and hitting a one-month low.
The peso lost as much as 3.7% to hit the day's low of
19.17 against the dollar, before paring some of the decline, on
spillover concerns from not only U.S. tech lender SVB ,
but also Signature Bank that went under on Sunday.
Among others, Brazil's real fell 0.95%, before paring the losses, and Peru's sol slipped 0.1%, respectively.
The Colombian peso fell 1.2%, tracking lower oil prices, while Chile's peso also lost 1.2% on lower copper prices. Consequently, the MSCI's index for Latin American currencies dropped 2.2%, on track for its largest one-day decline this year. Financial stocks in the region also came under pressure, with Mexico's Banorte losing 2% and Brazil-listed Santander Brasil SA and Itau Unibanco dropping about 1% each. The broader MSCI Latin American stocks gauge lost 2.6%, hitting a ten-week low. Benchmark indexes of Chile , Colombia and Argentina falling between 1% and 4.6%, while that of Mexico bucked the trend with a 0.6% gain. However, the impact of SVB on Latin American markets is likely to be short-lived as focus eventually shifts to a weaker dollar, said Jim Barrineau, chief investment strategist at Main Street Financial Group. The dollar slipped 0.6%, posting its steepest three-day decline so far this year, as markets bet the Federal Reserve will halt or trim its interest rates hikes to stabilize financial conditions.
"If the Fed is forced to curb or end the rate-hiking cycle, the dollar should be softer and benefit Latin America, where central banks are pretty much ahead of the curve and are starting to gain the ability to actually cut rates," Barrineau said. On that note, Brazilian Finance Minister Fernando Haddad sees room to cut rates, emphasizing that establishing a new fiscal framework would have a more significant impact than changing the inflation target.
Further, Brazil's Lower House Speaker Arthur Lira said it was still hard to set a time frame for when tax reform could be voted by the chamber, but could happen in the first half of the year. Meanwhile, ratings agency Fitch believes that Chile's tax bill rejection adds to fiscal and reform uncertainties, echoing recent similar views from Moody's.
Latin American stock indexes and currencies at 2000 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 961.69 0.67 MSCI LatAm 2124.79 -2.61
Brazil Bovespa 103223.37 -0.38
Mexico IPC 53133.13 0.64
Chile IPSA 5337.04 -1.05 Argentina MerVal 225482.00 -4.626
Colombia COLCAP 1154.07 -2.8 Currencies Latest Daily %
change
Brazil real 5.2668 0.02
Mexico peso 18.9781 -2.62
Chile peso 805.1 -1.22
Colombia peso 4768.01 -1.17
Peru sol 3.7857 -0.12
Argentina peso (interbank) 201.8500 -0.55 Argentina peso (parallel) 373 0.00 (Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru
Editing by Marguerita Choy and Grant McCool)
