for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

EMERGING MARKETS-Hawkish central banks drive Latam FX past broader peers this week

    * MSCI rescinds Argentina's emerging market status
    * Mexican peso set for best week in over a year
    * Latam FX to add nearly 3% this week

    By Ambar Warrick
    June 25 (Reuters) - Mexico's peso extended gains on Friday
after a surprise interest rate hike, while Latin American
currencies were set to outpace their emerging market peers this
week on a slew of hawkish central bank signals. 
    The peso rose 0.5% after surging 1.6% on Thursday-
its best day in 2021 so far. The currency was also set for its
best week in more than a year, with a 4.5% jump.
    The Mexican central unexpectedly hiked rates to 4.25%,
citing a recent rise in local inflation, as well as possible
price spillovers from the United States.
    "This suggests to us that year-on-year core inflation, and
core inflation momentum, will need to show evidence of easing,
and that Banxico will continue to tighten policy (at a minimum)
until that is achieved," Sacha Tihanyi, head of emerging markets
strategy at TD Securities, wrote in a note. 
    Argentine markets remained in focus after MSCI said it would
reclassify its Argentina index to Standalone Markets status,
from Emerging Markets, citing issues over strict capital
controls.
    JPMorgan predicted $610 million of capital outflows from
Argentina, due to the reclassification. But the peso
showed little reaction due to the capital controls. 
    Brazil's real, which was flat on Friday, was
set to add 3.5% this week after minutes of the central bank's
last meeting showed a 100 basis point hike was on the cards.
    The real has benefited greatly from a hawkish central bank,
and recently hit a one-year high. It is also among the best
performing emerging market currencies this year. 
    Data on Friday showed Brazilian consumer inflation surged in
the first half of June, while a separate reading showed the
country's current account deficit at its smallest in more than
13 years.
    Chile's peso rose 0.8%, and was set to add 2.6% this
week after the minutes of the Chilean central bank's last
meeting showed it was considering an interest rate hike.

    The hawkish signals put MSCI's index of Latam currencies
 on course for a weekly gain of nearly 3%,
outpacing a 0.3% rise in the index of broader EM currencies
.
    The Latam index has performed far better than its EM peer
this year, adding more than 4%, compared to a 1.4% gain. 
    Latin American stocks have marked a similar
milestone, after largely lagging their peers through 2020.
    
    Sentiment towards emerging markets was bolstered on Friday
after U.S. consumer spending data - a key gauge of inflation for
the Fed - remained unchanged in May, furthering the Fed's stance
that inflation was likely to be transient. 
    
     Key Latin American stock indexes and currencies:
    
                              Latest       Daily % change
 MSCI Emerging Markets         1381.11                     1
                                        
 MSCI LatAm                    2704.38                  0.65
                                        
 Brazil Bovespa              129472.86                 -0.03
                                        
 Mexico IPC                   50459.43                  -0.2
                                        
 Chile IPSA                    4436.76                  0.35
                                        
 Argentina MerVal                    -                     -
                                        
 Colombia COLCAP               1277.75                 -0.08 Currencies             Latest       Daily % change
 Brazil real                    4.9050                 -0.01
                                        
 Mexico peso                   19.7571                  0.47
                                        
 Chile peso                     727.83                  0.77
                                        
 Colombia peso                 3743.05                  0.54
 Peru sol                       3.9838                  0.00
                                        
 Argentina peso                95.5800                 -0.02
 (interbank)                            
                                        
 

    
 (Reporting by Ambar Warrick; Editing by Angus MacSwan)
  
for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up