*
Dollar slides as investors digest Credit Suisse rescue
*
Fed, Brazil central bank meetings eyed on Wednesday
*
Chile peso, Peru sol gains on strong copper prices
*
Latam FX adds 0.9%, stocks gain 0.5%
(Adds comment; updates prices, details)
By Shreyashi Sanyal and Bansari Mayur Kamdar
March 20 (Reuters) - Latin American currencies rose 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 MSCI's Latin American currencies index rose 0.9%, while its gauge for stocks in the region added 0.5%.
Both indexes recorded hefty falls last week, with stocks
clocking their worst week in nine months.
The dollar index fell 0.5% 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 bet 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.
The Brazilian real gained 0.7% against the dollar. 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.
"Traditionally, there's been a pretty decent correlation
between major Latin countries and the Fed, though this time
Brazil is likely to be on hold under almost any circumstance,"
said James Barrineau, chief investment strategist at Main Street
Financial Group.
"It is possible that the Fed decides not to hike rates
and the Brazilian central bank could surprise and maybe even cut
a little bit."
Brazil's Finance Minister Fernando Haddad said 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. Bank of Mexico Governor Victoria Rodriguez said on Friday the Mexican banking system is solid and she sees no contagion from U.S. banking crisis.
Currencies of top copper producers Chile and Peru , rose 0.3% and 0.8%, respectively, on higher red metal prices. 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.
Chile also signed a 15-year credit line for $1 billion with the Inter-American Development Bank (IDB) to promote the development of small and medium-sized companies, the Ministry of Finance reported on Sunday.
Latin American stock indexes and currencies at 1850 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 943.97 -0.8 MSCI LatAm 2079.61 0.42
Brazil Bovespa 100846.78 -1.11
Mexico IPC 51925.61 -1.1
Chile IPSA 5172.34 1.18
Argentina MerVal 221806.14 0.03
Colombia COLCAP 1110.39 -0.72
Currencies Latest Daily %
change
Brazil real 5.2430 0.53
Mexico peso 18.7982 0.45
Chile peso 824.1 0.23
Colombia peso 4813.98 0.65
Peru sol 3.7747 0.13
Argentina peso (interbank) 204.5100 -0.56 Argentina peso (parallel) 381 0.52 (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in
Bengaluru; editing by Grant McCool and Richard Chang)
