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Latam FX drops against higher dollar; Hungary’s forint jumps


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Latin American currencies lost momentum

against a firmer dollar on Tuesday, while Hungary’s forint

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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

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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

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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-

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point hike during his speech at the Jackson Hole symposium last

week.

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 %

change

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 %

change

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)

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