*
Dollar drops as Fed hikes, but signals pause going forward
*
Brazil cbank seen holding rates at 13.75%
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Colombia's central bank raises 2023 inflation forecast to 9.5%
(Updates prices throughout, adds fresh analyst comment, details
on Fed decision, details on Suriname debt restructuring deal)
By Shreyashi Sanyal
May 3 (Reuters) - Latin American currencies firmed
against a sliding dollar on Wednesday after the U.S. Federal
Reserve delivered a small interest rate hike and signaled it may
pause further increases, ahead of Brazil's central bank decision
later in the day.
The MSCI's index for Latin American currencies added 0.7%, gaining solid ground after the Fed's decision to raise rates by 25 basis points was perceived by markets as its last in an aggressive 14-month tightening cycle, pushing the dollar index 0.4% lower. "The dollar is getting crushed as the end of the Fed's tightening cycle is likely here. Emerging market FX will have a nice run here as the interest rate differential should widely remain in their favor," said Edward Moya, senior market analyst at data and analytics firm OANDA. Brazil's real gained 1%, with focus also on Banco Central do Brasil's (BCB) interest rate decision at 2100 GMT.
The BCB is seen holding its benchmark Selic rate for the sixth straight meeting as it awaits more proof of disinflation before the possible start of an easing cycle in the third quarter.
"We expect the forward guidance to remain conservative given that projected inflation is expected to continue to track above the inflation target," Alberto Ramos, chief Latin America economist at Goldman Sachs, said in a note. "The case for preserving a restrictive stance and remaining vigilant is justified by the still intense services and core inflation pressures, further deterioration of short- and medium-term inflation expectation, growing fiscal and quasi-fiscal stimulus, and above-target inflation forecasts." The Bovespa stocks index pared earlier declines to trade flat.
Carrefour Brasil fell 9.5% after reporting a first quarter net loss of 113 million reais ($22.39 million).
The Mexican peso gained 0.5%. Mexican national oil company Pemex said its net profit almost halved in the first quarter to $3.15 billion as weaker sales outweighed lower costs and currency gains from a stronger peso. Colombia's peso jumped 1.4% against the dollar. The technical team of Colombia's central bank on Tuesday raised its outlook for 2023 inflation amid persistent consumer price growth. Chile's peso rose 0.7%. Chile's Codelco, the world's largest copper producer, posted a 73% drop in its pre-tax profit for the first three months of this year.
The Argentine peso rose 2.6% to 464 per dollar in popular black markets. Elsewhere in emerging markets, the Czech crown inched 0.4% up after its central bank kept interest rates unchanged, as expected. Malaysia's ringgit extended gains after its central bank surprisingly hiked interest rates by 25 basis points.
Suriname
reached an agreement in principle with its Eurobond
creditor committee, according to a government statement, to
restructure its two outstanding dollar-denominated bonds with
nearly $600 million outstanding.
Key Latin American stock indexes and currencies by 1955 GMT:
Stock indexes Latest Daily
%
change
MSCI Emerging Markets 970.20 -0.38
MSCI LatAm 2195.41 0.52
Brazil Bovespa 101857.3 -0.07
1
Mexico IPC 54965.13 -0.39
Chile IPSA 5370.23 0.02
Argentina MerVal 289063.4 -2.222
9
Colombia COLCAP 1155.79 -0.19
Currencies Latest Daily
%
change
Brazil real 4.9942 1.03
Mexico peso 17.9259 0.27
Chile peso 803.7 0.72
Colombia peso 4629.5 1.25
Peru sol 3.6987 0.04
Argentina peso (interbank) 225.1500 -0.22 Argentina peso (parallel) 464 2.16
(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in
Bengaluru; Editing by Emelia Sithole-Matarise and Marguerita
Choy)
