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Currencies in Mexico, Chile lead Latam FX lower amid growth worries


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Currencies in both Mexico and Chile slid

on Thursday, leading declines in Latin America on worries of

growth, and taking cues from a global rout sparked by aggressive

monetary tightening to tame sky-high inflation.

Markets across the globe were hit by a bout of selling

pressure as investors worried that the U.S. Federal Reserve’s

75-basis-point rate hike on Wednesday could tip the world’s

largest economy into a recession.

“The Fed accelerating hikes means an earlier/deeper

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recession becomes more likely. Given that the market was

prepared for the outcome, the short term price action has been

all over the place,” Citi strategists wrote in a client note.

“As such U.S. rates remain a headwind for Latam rates, and

the USD remains bid, even though Latam may still outperform when

volatility calms down.”

Aggressive monetary policy and stubborn inflation have hit

developing world assets among other riskier assets. Latin

American markets are also particularly sensitive to demand from

China, which is tackling another surge in COVID-19 cases with

tough lockdowns.

The Mexican peso plunged 2%, while stocks in the

region slipped 1.1%. Mexico’s central bank chief said the

country’s financial system is resilient but warned of risks due

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to remaining effects of the COVID-19 pandemic, repercussions

from Russia’s invasion of Ukraine and global inflationary

pressures.

Chile’s peso dropped 1.8% in tandem with prices of

copper, its top export. Chile’s government is set to push

forward its tax reform plans, including a bill on mining

royalties, by the end of this month, legislation that could

impact the world’s top copper producer.

The country is also in the process of overhauling its

market-orientated constitution which dates back to the military

dictatorship of Augusto Pinochet.

Ratings agency Moody’s said on Wednesday, investment in

Chile’s mining sector could face gridlock if political

uncertainty over a new constitution is not resolved.

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Colombia’s peso fell 0.9%, while Argentina’s black

market peso jumped 4.7% after a large interest rate

hike.

Argentina’s central bank sharply hiked the country’s

benchmark interest rate as it battles soaring inflation, lifting

the rate 300 basis points to 52%.

Brazilian markets were shut on Thursday on account of a

public holiday.

Key Latin American stock indexes and currencies at 1429 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1006.70 -1.31

MSCI LatAm 2148.29 0.15

Brazil Bovespa – –

Mexico IPC 47741.34 -1.25

Chile IPSA 5042.28 -1.89

Argentina MerVal 86982.71 -1.676

Colombia COLCAP 1457.22 -0.43

Currencies Latest Daily %

change

Brazil real – –

Mexico peso 20.6634 -2.02

Chile peso 872.3 -1.94

Colombia peso 3919.4 -0.92

Peru sol 3.725 0.00

Argentina peso (interbank) 122.8700 -0.14

Argentina peso (parallel) 212 2.36

(Reporting by Shreyashi Sanyal in Bengaluru

Editing by Alistair Bell)

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