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Dollar falls after Fed raises rates, forecasts future hike
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Brazil central bank seen keeping rates unchanged at 13.75%
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Colombia government to send pension proposal to Congress
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Mexico inflation rate brings good news, uncertainty remains -Espinosa
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Latam FX up 0.6%, stocks rise 0.5%
(Adds comment, details on Fed decision; updates prices)
By Shreyashi Sanyal and Bansari Mayur Kamdar
March 22 (Reuters) - Latin American currencies rose on
Wednesday against a soft dollar after the U.S. Federal Reserve
concluded its monetary policy meeting by hiking its key policy
rate by quarter of a percentage point and hinted it was on the
verge of pausing future hikes.
Lifting emerging market currencies , the U.S.
dollar weakened 0.6% as the Fed raised its interest rates
by a smaller 25 basis points, as opposed to a 50 bps increase
expected earlier this month amid recent turmoil in financial
markets spurred by the collapse of two U.S. banks.
"Bank runs have done the Fed’s job for it," said David
Russell, vice president of market intelligence at TradeStation.
"The Fed acknowledged off the bat how credit conditions have tightened, which could reduce inflation. They also toned back the commitment to aggressive rate hikes. This is a net positive for sentiment because it puts the Fed back in wait-and-see mode instead of an all-out tightening campaign"
The MSCI's index for Latin American currencies gained 0.6%, while stocks advanced 0.5%. Brazil's real erased early losses and added 0.3% against the greenback.
However, investors remained cautious ahead of Brazil's Monetary Policy Committee (Copom) decision. Copom, which sets rates, is seen keeping the benchmark Selic rate at a six-year high of 13.75%.
"I do think that they'll set the market up for eventual rate cuts and hopefully that will improve sentiment in Brazil," said James Barrineau, chief investment strategist at Main Street Financial Group in New York.
President Luiz Inacio Lula da Silva also approved Rodolfo Froes and Rodrigo Monteiro for two key positions in the central bank, in what should be his first nominations for the bank he has been heavily criticizing.
Mexico's peso gained 0.6%. The country's economy
likely grew by 3.5% in February 2023, compared with the same
month a year earlier, a preliminary estimate showed.
On the inflation front, Mexico's recent consumer prices
data brought "some good news," but the country remained in a
complex and uncertain environment going forward, central bank
deputy governor Irene Espinosa said in an interview.
Colombia's peso rose 1.0%, while Peru's sol and Chile's peso climbed 0.5% and 1.2%, respectively.
The Colombian government will file a pension reform project in Congress to expand coverage and strengthen the state pension administrator, but it raises doubts about the impact it would have on the capital markets and public finances.
Prices of Argentina's sovereign debt slid, a day after government measures were revealed to push state entities to give up their local and foreign-law sovereign bonds in dollars to tamp down on exchange rate volatility. Meanwhile, data showed
Argentina's economy expanded 1.9% in the fourth-quarter of 2022 versus the same period in 2021, slightly above analysts' forecasts of a growth 1.7%.
Key Latin American stock indexes and currencies at 1906 GMT:
Stock indexes Latest Daily % change
MSCI Emerging Markets 965.67 1.39 MSCI LatAm 2111.58 0.56
Brazil Bovespa 101835.18 0.83
Mexico IPC 52872.46 0.42
Chile IPSA 5271.28 -0.53
Argentina MerVal 227378.35 -0.617
Colombia COLCAP 1129.75 0.01 Currencies Latest Daily % change
Brazil real 5.2266 0.35
Mexico peso 18.4868 0.54
Chile peso 809.9 1.48
Colombia peso 4762.5 0.94
Peru sol 3.7661 -0.11
Argentina peso (interbank) 205.3600 -0.17 Argentina peso (parallel) 387 1.81 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The race to raise rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Bansari Mayur Kamdar, Shreyashi Sanyal & Shashwat
Chauhan in Bengaluru; Editing by Alison Williams)
