EMERGING MARKETS-Latam FX rallies as US jobs data pushes dollar down; Colombia affected by downgrading

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Band Susan Mathew

July 2 (Reuters)Emerging market currencies rallied on Friday as the dollar fell on strong US employment data, while Colombian assets were hit with a second downgrade to junk.

The real one from Brazil BRBY, BRL = rose as much as 1.2% before trading flat, while the Mexican peso MXN = increased by almost 1%. Chilean peso CLP = firmed by 1.1%, while Peruvian soil PEN = broke a three-day losing streak.

US data showed non-farm payrolls rose 850,000 more than expected in June, sending the dollar .DXY higher, but it fell back as investors digested a higher unemployment rate. FRX /

“It was strong enough but not too strong, which is exactly what (the markets) wanted to see. If you had too strong a report, the market could have reacted negatively by saying that it means the (Federal Reserve American) can’t wait two years to raise interest rates, ”said Darrell Cronk, CIO, Wells Fargo Wealth & Investment Management, New York.

Rising US interest rates dampen the attractiveness of riskier emerging market currencies, as it narrows the rate differential.

In Brazil, the real last traded at 5.04 per dollar. Data showed industrial production rose for the first of four months in May, up 1.4%, but missed a Reuters poll forecast of 1.7% and only two of the four major categories – goods d equipment and consumer goods – have seen their production increase.

Meanwhile, the head of the Lower House said there was no political path to launch impeachment proceedings against Brazilian President Jair Bolsonaro. Calls for his ouster have intensified following an investigation into the handling of the COVID-19 crisis.

Bolsonaro faces elections next year and said on Thursday he would not hand over power in the event of fraud. As elections approach, the real is expected to depreciate to 5.10 at the end of 2021, according to a Reuters poll. A hawkish central bank has kept its carry trade value attractive so far this year.

Currency of Colombia COP = hit its lowest in nearly two months and the stock market .COLCAP lost 0.6%, while 2027 Colombian dollar bonds 195325DL6 = fell a half-cent to a one-month low after Fitch joined S&P on Thursday in lowering Colombia’s long-term foreign and local rating in favor of deteriorating public finances.

The premium required by investors to hold Colombian debt .JPMEDGCOLR above safe havens US Treasuries jumped 6 basis points (bps) to 256 bps – their highest since early October 2020, JPMorgan EMBI index showed .JPMEGDR.

Main Latin American Stock Indices and Currencies at 14:43 GMT:

Stock market indices

Latest

% daily change

MSCI Emerging Markets .MSCIEF

1354.87

-0.98

MSCI Latin America .MILA00000PUS

2602.95

0.12

Brazil Bovespa .BVSP

126718.89

0.84

Mexico CPI .MXX

50255.92

-0.24

Chile IPSA .SPIPSA

4335.51

-0.23

Argentina MerVal .MERV

62238.69

0.288

Colombia COLCAP .COLCAP

1252.94

-0.59

Currencies

Latest

% daily change

Real brazil BRBY

5.0435

-0.01

mexican peso MXN = D2

19.87770

0.55

Chilean peso CLP = CL

733.8

0.94

Colombian peso COP =

3776.8

-0.02

Peruvian soil PEN = PE

3.8682

-0.23

Argentine peso (interbank) ARS = RASL

95.7900

-0.02

Colombian Peso, 2027 bond after Fitch demotion in the trash https://tmsnrt.rs/2TxVONE

(Report by Susan Mathew in Bangalore;)

(([email protected]; + 91-80-6287-2704;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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