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EMERGING MARKETS-Latam FX subdued as dollar strengthens; Chilean peso tumbles

Shreyashi Sanyal
·3 min read

* Chilean peso falls for third straight day * Brazilian real steadies after previous session's surge * Petrobras CEO denies claims of 'predatory' fuel pricing policy (Updates prices throughout, adds background) By Shreyashi Sanyal Jan 13 (Reuters) - Latin American currencies were mostly muted on Wednesday, with Chile's peso tumbling for the third straight session as steadying U.S. Treasury yields helped support the dollar. The peso slid 2% by afternoon trading against the dollar, recently coming under pressure from weaker prices of copper, the country's main export, on demand worries as top consumer China imposed new curbs due to the spread of the coronavirus. Analysts say months of anti-government protests in late 2019 and the pandemic have created fertile ground for populists in Chile, and a divided political system may make fiscal consolidation more difficult to achieve. Chileans are also gearing up to vote for its new 155-member constitutional body in April. Most other currencies in Latin America traded in a tight range against a rising dollar, even as near-term prospects for the safe-haven currency remained bearish. Brazil's real traded 0.4% higher on Wednesday, after recording its best day since late August 2020 in the previous session. Data showed services activity in Brazil rose for a sixth consecutive month in November, more than twice as fast as analysts had expected and suggesting Latin America's largest economy went into the year-end on strong footing. "A normalization of key rates is likely to stabilize BRL over the course of 2021 but in view of the continued negative interest rates it will not allow for a rally," said Melanie Fischinger, FX and emerging market analyst at Commerzbank. "Uncertain fiscal policy discipline and a slowing reform process could put considerable pressure on the real from time to time." Continued delays in Brazil rolling out a vaccine against the coronavirus will increase the risks to the expected economic recovery this year, ratings agency Moody's lead sovereign analyst for Brazil said. Mexico's peso and Colombia's peso were flat to marginally lower. Colombia's Bogota will impose strict two-week quarantines on six more neighborhoods starting next week, Mayor Claudia Lopez said on Tuesday, as the city moves to control a second wave of coronavirus. Among stocks in the region, Brazil's Bovespa fell 1.4%, with state-run oil giant Petroleo Brasileiro SA falling 3.8%. Roberto Castello Branco, chief executive of Petrobras, has dismissed accusations from private fuel importers that the firm is enforcing a price policy that does not reflect market dynamics. Key Latin American stock indexes and currencies at 1858 GMT: Stock Latest Daily % change indexes MSCI Emerging Markets 1363.96 0.77 MSCI LatAm 2506.11 0.52 Brazil Bovespa 121831.12 -1.75 Mexico IPC 45786.00 -0.36 Chile IPSA 4633.80 0.73 Argentina MerVal 50941.15 -0.509 Colombia COLCAP 1454.96 -0.46 Currencies Latest Daily % change Brazil real 5.2990 0.36 Mexico peso 19.8031 -0.15 Chile peso 737.9 -1.79 Colombia peso 3474.69 0.00 Peru sol 3.6138 -0.11 Argentina peso (interbank) 85.5500 -0.09 Argentina peso (parallel) 156 1.92 (Reporting by Shreyashi Sanyal in Bengaluru Editing by Bernadette Baum and Alistair Bell)