Mexico’s peso leads Latam FX gains, real lags this week


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Latin American currencies recovered from

recent losses on Friday but were set to end the week lower on

turbulent commodity markets and concerns over Chinese economic

growth.

Mexico’s peso led the charge, up 0.8% and capping

weekly losses at around 0.4% as the dollar slipped on profit

taking. MSCI’s index of Latam currencies was up

0.6%, breaking a 9-day losing streak.

“Risk sentiment seems to be finding its footing again,” said

Mazen Issa, senior FX strategist at TD Securities.

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Chile’s peso rose 0.7%, tracking higher copper prices

after major importer China cut the amount of cash that banks

need to hold to boost an economic recovery.

But China’s move to cut the reserve requirement ratio (RRR)

raised broader questions over the pace of an economic recovery

in the country, given that it has so far led a post-COVID

economic bounce.

An economic slowdown in China would be negative for Latin

America given the region’s large dependence on China as a

destination for agriculture and mining exports.

“We think this week was in part driven by a growth scare

amid some concern for rising infections that made hawkish pivots

by central banks a bit ambitious,” he said. “Typically, a

cooling in growth has led to a moderation in risk.”

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On the week, emerging currencies were set to end lower, with

a 3.8% percent drop by Brazil’s real being the

steepest.

The real did not trade on account of a holiday on Friday.

Growing concerns over political unrest in the country have

detracted from the real’s appeal.

Two polls on Thursday showed President Jair Bolsonaro’s

disapproval ratings rose to the highest level since he came to

power 2-1/2 years ago, amid growing discontent over his

administration’s handling of the COVID-19 pandemic.

Colombia’s peso ended the week down more than 2%.

Wild swings in oil prices after the breakdown of OPEC talks

hampered the currency through the week.

Most Latin American stocks rose in early trade, tracking a

broader recovery in global markets after steep losses through

the week. MSCI’s index of regional stocks was

set to lose 4% this week, its worst week in more than four

months.

Argentine markets were closed for a holiday.

Key Latin American stock indexes and currencies:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1319.38 0.24

MSCI LatAm 2511.62 0.81

Mexico IPC 49709.64 0.28

Chile IPSA 4232.44 1.06

Colombia COLCAP 1294.65 0.83

Currencies Latest Daily %

change

Mexico peso 19.8534 0.71

Chile peso 748.3 0.56

Colombia peso 3827 0.26

Peru sol 3.9646 -0.41

(Reporting by Ambar Warrick; Editing by Dan Grebler and Andrew

Heavens)



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