August 15, 2019 / 8:39 PM / 10 months ago

EMERGING MARKETS-Argentine peso jumps after heavy losses, Mexico central bank cuts rates

 (Updates prices)
    By Susan Mathew
    Aug 15 (Reuters) - Argentina's peso jumped nearly 5% on
Thursday ending a punishing three-day rout, while Mexico's peso
 rose after the country's central bank cut its key rate
for the first time in more than 5 years.
     The Argentine peso closed at 57.4 pesos per
dollar on signs that the country's president and his main
opposition rival were determined to control an economic crisis
sparked by a shock primary-election result that wiped out around
a quarter of the peso's value.
    Opposition presidential candidate Alberto Fernandez trounced
 center-right President Mauricio Macri in Sunday's vote, which
raised fears of a return to protectionist policies if Fernandez
were to win the October general elections.
     Win Thin, global head of emerging market currency strategy
at Brown Brothers Harriman (BBH) pinned the strength in the peso
to selling of dollar by some bank's after the central bank
established a ceiling for foreign exchange holdings equivalent
to 5% of a bank's net worth which is set to take effect on
August 20.  
    Buenos Aires' Merval stock index rose 4.2%.   
    In Mexico, the peso rose 0.4% after the country's central
bank cut its key rate by 25 basis points to 8%, citing slowing
inflation, a sluggish economy, and the recent behavior of the
external and domestic yield curves.
    There was some knee-jerk rise right after the cut, but
markets traded back to earlier levels. Analysts had been more or
less split between expecting the bank to hold or cut rates.
    The economic indicators argue for a rate cut, "but it's a
risky move given emerging markets remain under pressure; and the
yield spread is one that supports EM and this is cutting a
little bit into that," BBH's Thin said.
    Mexican stock, however, fell. In line with a choppy
session on Wall Street, most Latam stock markets were mixed,
with Colombia stocks rising 0.4%, while those in Brazil
stocks slipped more than a percent.
    Brazil's real climbed 1.6%, lifted by news that the
central bank said it would sell dollars outright in the spot
currency market this month for the first time in over a decade
in response to rising demand for liquidity.
    While most regional currencies rose, helped also by some
trade optimism after China showed some willingness to work out a
deal even as it has vowed retaliation against U.S. tariffs,
Colombia's peso fell 0.4%. 
    Colombia's gross domestic product grew 3% in the second
quarter, the government said on Thursday, buoyed by the retail
and financial sectors, but the print came in just below market
expectations of 3.1%.
    Chile markets were closed for a local holiday. 

    Key Latin American stock indexes and currencies at 2019 GMT:
    Stock indexes             Latest    Daily %
 MSCI Emerging Markets          963.52     -0.09
 MSCI LatAm                    2579.24     -0.66
 Brazil Bovespa               99056.91      -1.2
 Mexico IPC                   38571.73      -0.2
 Argentina MerVal             31182.28     4.216
 Colombia IGBC                12391.30      0.41
       Currencies             Latest    Daily %
 Brazil real                    3.9903      1.57
 Mexico peso                   19.6027      0.37
 Colombia peso                  3468.8     -0.38
 Peru sol                        3.391      0.15
 Argentina peso                57.1000      5.43

 (Reporting by Susan Mathew in Bengaluru; 
Editing by Sandra Maler)
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