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Rand hits six-week high as central bank hikes by 50 bps
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Mexico hikes benchmark interest rate by 25 bps to 11.25%
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Colombia also hikes benchmark rate by 25 bps to 13%
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Brazil proposes new fiscal rules, lifts its markets
(Adds market analysts' comment; updates prices)
By Shreyashi Sanyal and Bansari Mayur Kamdar
March 30 (Reuters) - The South African rand jumped to a
six-week high on Thursday after its central bank surprisingly
raised interest rates above estimates, while the currencies of
Colombia and Mexico slipped as central banks raised rates as
expected.
The rand strengthened as much as 17.75 against the
dollar, touching its highest level since mid-February and was
last up 1.6%.
The South African Reserve Bank (SARB) raised its main lending rate by 50 basis points (bps) to 7.75% against expectations of a 25 bps increase. "The rand is a short term beneficiary of the surprise decision to hike rates more than was anticipated," said Shaun Murison, senior market analyst at IG in South Africa. "However, while we are seeing some short term strength, the longer term trend for the domestic currency remains that of depreciation and its fate will largely be dictated by global risk on risk off scenarios and their effects on key export commodity pricing as well." Analysts mostly agreed that the decision was more hawkish than expected, it also proved that the SARB was committed to bring inflation under control.
The rand was a clear outperformer on the day, with the MSCI's broader emerging markets currencies index up 0.3%. The MSCI's index for Latin American currencies added 0.6% .
Mexico's peso inched 0.1% lower against the greenback, while stocks in the region eked out gains of 0.5%. The Bank of Mexico moderated the pace of its monetary tightening to 25 bps, after increasing rates by 50 bps in February. Colombia's peso fell 0.7% after its central bank also raised rates by 25 bps as expected by analysts, with many saying this could be the final hike in a long tightening cycle.
"We expect the central bank to stay on the sidelines over the coming months," Andres Abadia, chief Latam economist at Pantheon Macroeconomics, said in a note. "Volatile external conditions, and lingering upside inflation risks, will prevent the Board from cutting interest rates anytime soon." Stocks in Colombia rose 2%. Brazil's real gained 0.8% after the announcement of a new fiscal rules proposal, which would cap spending growth at 70% of revenue growth while also setting a floor for public investments.
If the rule were to be implemented in full it would "go some way towards stabilizing the public debt ratio," said William Jackson, chief emerging markets economist at Capital Economics. Brazil's benchmark stock index rose 1.4% as analysts greeted the proposal with measured relief after months of uncertainty.
Latin American stock indexes and currencies at 1910 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging Markets 986.64 0.66 MSCI LatAm 2209.93 1.53
Brazil Bovespa 103183.05 1.37
Mexico IPC 54147.41 0.49
Chile IPSA 5307.92 -0.11
Argentina MerVal 252705.58 1.446
Colombia COLCAP 1141.76 1.98
Currencies Latest Daily %
change
Brazil real 5.0953 0.78
Mexico peso 18.1030 -0.11
Chile peso 789.2 0.71
Colombia peso 4641.45 -0.66
Peru sol 3.7571 -0.47
Argentina peso (interbank) 208.5600 -0.12 Argentina peso (parallel) 389 1.03 (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in
Bengaluru, Editing by Angus MacSwan and Grant McCool)
