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Dollar slide, Credit Suisse rescue support gains
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Fed, Brazil central bank meetings eyed on Wednesday
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Chile peso, Peru sol gains on strong copper prices
By Shreyashi Sanyal March 20 (Reuters) - Brazil and Mexico led gains among Latin American currencies on Monday against a weakening dollar as hopes grew that the U.S. Federal Reserve could pause its interest rate hikes in light of stresses in the global banking sector.
The real gained 0.7% against the dollar, which fell 0.4% as money markets started to price in the possibility of the Fed leaving its benchmark lending rate unchanged at its meeting this week. This is a stark contrast to last week's bets of a 25 basis-point hike in the U.S. lending rate. Higher interest rates in developed world economies tend to make riskier emerging market assets looks less attractive.
UBS said over the weekend it would buy fellow Swiss bank Credit Suisse for 3 billion francs ($3.2 billion), which follows two U.S. regional bank collapses that have whipsawed global trading sentiment in the last two weeks.
Brazil's central bank was also on tap for the week, with expectations that Banco Central do Brasil(BCB) will keep the Selic rate at 13.75%, for the fifth straight meeting, after stopping an aggressive hiking cycle.
"The forward guidance may soften slightly in recognition of the weakening of the real activity momentum, growing signs of labor market softness, tighter credit conditions triggered by rising non-performing loans and recent distress in a number of high-profile corporates," economists at Goldman Sachs wrote in a client note.
"And the recent sharp dovish repricing of US and global rates and downside risks to the global economy." Brazil's Finance Minister Fernando Haddad said that President Luiz Inacio Lula da Silva still intends to announce a highly anticipated new fiscal framework before his trip to China on Saturday. Mexico's peso added 0.7%, after falling 1% in the previous session.
Higher copper prices currencies of top producers Chile and Peru , which rose 0.3% and 0.7%, respectively.
In Chile, central bank data showed its mining-driven economy grew a smaller-than-expected 0.1% in the last quarter of 2022, but broke a streak of three quarter-on-quarter declines to record 2.4% growth for the full year. "The weaker-than-expected expansion in Chile in Q4 confirms that high inflation and tight monetary policy are taking a heavy toll on the economy," said Kimberley Sperrfechter, Latin America economist at Capital Economics.
The MSCI's Latin American currencies index rose 0.9%, while its gauge for stocks in the region added 0.6%. Both indexes recorded hefty falls last week, with stocks clocking their worst week in nine months.
Latin American stock indexes and currencies at 1526 GMT:
Stock indexes Latest Daily
%
change
MSCI Emerging Markets 944.13 -0.78
MSCI LatAm 2082.17 0.55
Brazil Bovespa 101524.7 -0.45
4
Mexico IPC 51925.61 -1.1
Chile IPSA 5178.35 1.3
Argentina MerVal 224361.1 1.182
4
Colombia COLCAP 1110.39 -0.72
Currencies Latest Daily
%
change
Brazil real 5.2426 0.54
Mexico peso 18.8183 0.34
Chile peso 825.2 0.10
Colombia peso 4817.11 0.59
Peru sol 3.7798 0.00
Argentina peso (interbank) 204.4900 -0.55
Argentina peso (parallel) 379 1.06
(Reporting by Shreyashi Sanyal in Bengaluru; editing by Grant
McCool)
