|Day's Range||0.00 - 0.00|
|52 Week Range|
With the U.S. dollar broadly strengthening after the release of the Fed's policy statement, the Brazilian real led losses among the regional currencies with a 0.7% decline ahead of a rate decision from Brazil's central bank. New projections also showed policymakers at the median expected rates to stay within the new range through 2020, driving investors to cut bets on further U.S. rate cuts.
MSCI's index of Latin American currencies fell 0.8% with Chile's peso raking up the biggest losses. Focus was also on Brazil's central bank meeting this week when officials are widely expected to cut record-low rates by 50 basis points in order to shore up Latin America's largest economy. "Low inflation, subdued activity and continued fiscal consolidation progress bode well for a 50bp policy rate cut this week," said Gustavo Rangel, chief economist, Latam at ING in a note.
Oil prices surged nearly 20% at one point on Monday after the attack in Saudi Arabia, the world's biggest oil exporter, halved the kingdom's production. Trump also said the United States was "locked and loaded" for a potential response to the strikes, and that Iran appeared responsible, however, raising tensions. While currencies of some oil-exporters benefit from the steep rise in oil prices, concerns that an oil supply shock and geopolitical tensions would damage an already fragile global economy sapped investor demand for riskier assets.
Conciliatory trade measures between Washington and Beijing had set up most regional markets for weekly gains, with stimulus measures by the European Central Bank also lending support. Regional currencies firmed slightly against a steady dollar, and were set to add about 0.5% for the week. A central bank indicator showed that economic activity fell slightly in July, in contrast to other data that suggested the economy started the third quarter on strong footing.
The Sao Paulo. index rose 1%, with materials stocks pushing up the index the most. Chilean stocks rose about 0.3% and were slated for a seventh straight session of gains. The Mexican peso rose about 0.4% to near a one-month high.
MSCI's index of Latin American stocks rose 1.3%, holding near a one-month high, mirroring gains across global stock markets.
MSCI's index of Latin American stocks rose 0.6%, in line with the broader emerging markets equity index , as developing world assets held onto to September gains so far. "Despite continued weakness in growth data, EM assets have bounced in September (equities the most), likely driven by positive headlines on trade talks as well as potential China stimulus," said Caesar Maasry, head of emerging market equity strategy at Goldman Sachs in a note. Assets in commodity-dependent Latin American economies had taken a beating in August due to the long-drawn trade war between the United States and China, with growth dwindling in both Brazil and Mexico.
MSCI's index of Latin American stocks rose 1.6%, tracking gains in global stock markets after the world's two largest economies agreed to hold high-level talks in early October. Brazil's Bovespa index jumped 1.2%, boosted by gains in banking shares as central bank President Roberto Campos Neto said the economy should recover in the second half of year, most likely in the fourth quarter. Campos Neto also said inflation in Brazil is well-anchored over the short-, medium- and long-term horizons, giving policymakers room to reduce interest rates further.
MSCI's index of Latin American currencies came off their one-year lows to move 0,8% higher as weak manufacturing data in the U.S. put the greenback on the back foot. Brazil's real and Mexico's peso led gains, each up nearly 1%, getting an additional boost from higher oil prices. Chile's peso was only marginally higher, underperforming its regional peers after the central bank cut its key interest rate by 50bps on Tuesday as inflation levels continue to drag for the world's top copper exporter.
The peso opened sharply stronger, up 6% officially against the dollar, marking Wall Street's first reaction to Argentina's new currency controls after a long holiday weekend in the United States. "The black market rate is lower then the official suggesting that there is still some pressures there," said Edward Glossop, Latam economist at Capital Economics. "History suggests that capital controls do sometimes help to alleviate pressure on currencies in the near term, but over the longer term when people start finding loopholes in the system.
Adding to a bout of data signaling global slowdown, Mexico's central bank, Banxico, reduced its projected growth for Latin America's second-largest economy for the fifth time in a row for 2019 and expects a smaller expansion in 2020. Banxico also cut its inflation forecast for the end of 2019 to 3.2% from 3.7% on the back of growth risks arising from global trade disputes and struggling state oil firm Pemex, whose ratings downgrade poses a big threat to the sovereign debt. The Mexican peso shed 0.4%.
The Brazilian real dropped 0.5% to trade at 4.1527 per dollar, on course to give up gains made on Tuesday after the central bank sold dollars in the spot market, intervening for the first time in 10 years as the currency hit its weakest level in almost a year. The central bank also announced plans to sell up to $1.5 billion in the spot market on Wednesday but with repurchase commitments, on top of a planned $550 million spot market sale. "We think the USD sale will help slow down the pace of BRL depreciation as spot gets close to 4.20, but will not be able to hold it back if the external environment remains unfavorable," Citi's Dirk Willer wrote in a client note.