Latin American stocks slumped nearly 3%,
while major currencies lost ground against a firming dollar on
Tuesday amid a risk-off sentiment due to rising fears of rate
hikes and a global slowdown, with Chilean peso down ahead of
central bank decision.
Brazil’s benchmark Bovespa stock index fell 2.2% and
the currency real slipped 1.6% against the dollar after a
senior policymaker said Brazil’s central bank will need to be
cautious about handling the end of its current tightening cycle
and may still raise interest rates this month, underscoring that
inflation is only beginning to subside.
Volatility ahead of the upcoming elections continued, with
recent polls showing former President Luiz Inacio Lula da Silva
leading in the presidential race, followed by current President
“Bolsonaro still has a 20–25% chance of being re-elected,
thanks in large part to his use of government spending to
increase support… Additional fiscal expansion ahead of the
election next month cannot be ruled out,” TD Securities
strategists Elizabeth Johnson and Wilson Ferrarezi said in a
Chilean stocks slumped 2.65% as a market rally
following the rejection of a proposed new progressive
constitution petered out. Rating agency Fitch said the rejection
of new constitution prolongs uncertainties stemming from
The peso fell 1.3% ahead of the decision later in the
day where the Central Bank of Chile is expected to raise its
benchmark interest rate to 10.50% from 9.75% previously.
Also weighing on resource-rich Latam currencies, crude
prices fell, triggered by concerns over crumbling demand amid
new COVID-19 lockdowns in China and the possibility of more
interest rate hikes.
Currencies of major crude exporters including Colombia’s
peso and Mexico’s peso lost 0.4% and 0.7%,
Broadly pressuring emerging market currencies, the U.S.
dollar index climbed 0.55% after a report on the U.S.
services industry in August reinforced the view that the economy
was not in recession, while U.S. interest rates stay poised for
sharp rises and as recession talk stalks Europe.
“With the global economy slowing and interest rates rising,
new orders (both external and domestic) are likely to remain
soft across much of the emerging world over the coming months…
High inflation has also played a role in dampening domestic
demand,” said William Jackson, chief emerging markets economist
at Capital Economics.
Latam currencies and stocks have been under pressure this
year on risks of drying-up capital inflows, spiraling
inflation, geopolitical risks and fears of an acute global
Key Latin American stock indexes and currencies at 1900 GMT:
Stock indexes Latest Daily % change
MSCI Emerging Markets 964.02 -0.39
MSCI LatAm 2126.03 -2.91
Brazil Bovespa 109689.71 -2.24
Mexico IPC 45938.12 -0.19
Chile IPSA 5622.20 -2.65
Argentina MerVal 137597.07 -0.485
Colombia COLCAP 1225.07 -0.94
Currencies Latest Daily % change
Brazil real 5.2353 -1.58
Mexico peso 20.1362 -0.75
Chile peso 892.9 -1.32
Colombia peso 4473.95 -0.36
Peru sol 3.897 -0.54
Argentina peso (interbank) 140.5600 -0.22
Argentina peso (parallel) 272 -0.74
(Reporting by Anisha Sircar, Amruta Khandekar and Devik Jain in
Bengaluru; Editing by Jonathan Oatis and Lisa Shumaker)