Latin American currencies lost momentum
against a firmer dollar on Tuesday, while Hungary’s forint
jumped after the central bank left the door open for more
interest rate hikes following a 100 basis-point lift.
The forint which was trading at around 406.49 per
euro just before the decision, strengthened to as much as 401.74
following the hike to 11.75%, and was set for its best session
in more than seven weeks.
Hungary’s central bank said it would continue its hiking
cycle and introduced three measures to help drain interbank
liquidity. It sees inflation peaking near 20% later this year,
with risks to the upside.
“It’s clear that the (central bank) is struggling to contain
very strong and broad-based price pressures and we expect
interest rates to reach 13.50% by year-end,” said Liam Peach, EM
economist at Capital Economics, adding that peak inflation might
not emerge until early 2023.
“With the forint under pressure and external financing
conditions tightening, the risks remain skewed towards a shorter
and sharper increase in rates in the coming months.”
More broadly, emerging market currencies fell as the dollar
picked up after stronger-than-expected U.S. consumer confidence
data, staying close to two-decade highs.
MSCI’s EM index, which had risen by as much
as 0.3% earlier in the session, was last trading flat near
October 2020 lows as the South African rand, Mexican peso
and Brazil’s real all fell.
Investors also followed events around Brazil’s presidential
elections, with leftist leader Luiz Inacio Lula da Silva’s lead
over far-right incumbent President Jair Bolsonaro for October
election narrowing slightly, a CNT/MDA poll said, confirming a
tightening in the race shown by other major polls.
Mexican President Andres Manuel Lopez Obrador said that
inflation in his country would have reached 14% without
government subsidies to hold down fuel prices.
Risky assets had taken a hit after Federal Reserve Chair
Jerome Powell did little to change bets for another 75 basis-
point hike during his speech at the Jackson Hole symposium last
Meanwhile, a report showed the Biden administration plans to
ask the U.S. Congress to approve an estimated $1.1 billion arms
sale to Taiwan, a move that could further fray Sino-U.S. ties as
China considers Taiwan its own. Taiwan fired warning shots at a
Chinese drone which buzzed an islet controlled by Taiwan.
Key Latin American stock indexes and currencies at 1910 GMT:
Stock indexes Latest Daily %
MSCI Emerging Markets 991.53 -0.01
MSCI LatAm 2178.05 -2.21
Brazil Bovespa 110380.93 -1.73
Mexico IPC 45943.72 -0.82
Chile IPSA 5533.44 0.3
Argentina MerVal 141823.16 -1.378
Colombia COLCAP 1266.12 -1.84
Currencies Latest Daily %
Brazil real 5.1022 -1.37
Mexico peso 20.1414 -0.68
Chile peso 886.5 -0.52
Colombia peso 4415.45 -1.26
Peru sol 3.8127 0.15
Argentina peso (interbank) 138.5900 -0.20
Argentina peso (parallel) 287 1.74
(Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Matthew Lewis and Jonathan Oatis)