AGL 38.54 Increased By ▲ 0.97 (2.58%)
AIRLINK 129.50 Decreased By ▼ -3.00 (-2.26%)
BOP 5.61 Decreased By ▼ -0.03 (-0.53%)
CNERGY 3.86 Increased By ▲ 0.09 (2.39%)
DCL 8.73 Decreased By ▼ -0.14 (-1.58%)
DFML 41.76 Increased By ▲ 0.76 (1.85%)
DGKC 88.30 Decreased By ▼ -1.86 (-2.06%)
FCCL 35.00 Decreased By ▼ -0.08 (-0.23%)
FFBL 67.35 Increased By ▲ 0.85 (1.28%)
FFL 10.61 Increased By ▲ 0.46 (4.53%)
HUBC 108.76 Increased By ▲ 2.36 (2.22%)
HUMNL 14.66 Increased By ▲ 1.26 (9.4%)
KEL 4.75 Decreased By ▼ -0.11 (-2.26%)
KOSM 6.95 Increased By ▲ 0.10 (1.46%)
MLCF 41.65 Decreased By ▼ -0.15 (-0.36%)
NBP 59.60 Increased By ▲ 1.02 (1.74%)
OGDC 183.00 Increased By ▲ 1.75 (0.97%)
PAEL 26.25 Increased By ▲ 0.55 (2.14%)
PIBTL 5.97 Increased By ▲ 0.14 (2.4%)
PPL 146.70 Decreased By ▼ -1.70 (-1.15%)
PRL 23.61 Increased By ▲ 0.39 (1.68%)
PTC 16.56 Increased By ▲ 1.32 (8.66%)
SEARL 68.30 Decreased By ▼ -0.49 (-0.71%)
TELE 7.23 Decreased By ▼ -0.01 (-0.14%)
TOMCL 35.95 Decreased By ▼ -0.05 (-0.14%)
TPLP 7.85 Increased By ▲ 0.45 (6.08%)
TREET 14.20 Decreased By ▼ -0.04 (-0.28%)
TRG 50.45 Decreased By ▼ -0.40 (-0.79%)
UNITY 26.75 Increased By ▲ 0.35 (1.33%)
WTL 1.21 No Change ▼ 0.00 (0%)
BR100 9,806 Increased By 37.8 (0.39%)
BR30 29,678 Increased By 278.1 (0.95%)
KSE100 92,304 Increased By 366.3 (0.4%)
KSE30 28,840 Increased By 96.6 (0.34%)
Markets

Chile's peso falls on dovish central bank outlook, Latam FX rally cools

  • Chilean central bank sees below-neutral policy for next 2 years.
  • Magazine Luiza leads Brazil stocks higher.
  • Mexican peso under pressure from recent COVID spike.
Published July 15, 2021

Chile's peso led losses across Latin American currencies on Thursday as the central bank indicated that monetary policy would remain loose for longer, while most other units came off a series of strong sessions.

The peso dropped 1.2% as the central bank projected monetary policy to remain below neutral levels for the next two years. This came after the bank hiked rates to 0.75%, citing a pickup in local economic growth and inflation.

Still, the dovish outlook means Chilean lending rates will largely lag their emerging market peers. Brazil and Mexico, for instance, have hiked rates to 4.25% each this year, as economic growth and inflation heats up.

While Chile's interest rates sinking to 0.5% have been a symptom of the COVID-19 pandemic, the bank had been steadily cutting rates since mid- to late-2019 as a series of violent anti-government protests disrupted economic activity.

Latam FX falls, energy reform fears trip up Mexico's peso

Focus is now on the drafting process of a new Chilean constitution, which investors fear could introduce radical changes to market policy.

"We see very limited value in the monetary policy committee's dovish unconditional medium-term guidance, particularly in the context of fiscal policy in hyper-drive," Goldman Sachs analysts wrote in a note.

"A significant improvement in the COVID backdrop, above target headline and core inflation and supportive external backdrop have reduced to a very significant extent the need for monetary policy to continue to support the recovery."

Goldman Sachs sees Chilean rates between 1.5% to 1.75% by end-2021, while Credit Suisse sees them at 1.5%.

MSCI's index of Latin American currencies dropped 0.3% after rallying nearly 3% this week, as strong regional economic growth and positive cues from commodity markets helped offset fears of early policy tightening by the US Federal Reserve.

Brazil's real rises after 8 days of losses, Latam FX muted

The index had surged 1.2% on Wednesday after Fed Chair Jerome Powell reassured markets that monetary policy would stay loose for the time being.

Mexico's peso fell 0.4% on Thursday, coming under pressure from a recent spike in COVID-19 cases in the country.

Brazil's real fell 0.2% after surging 1.8% on Wednesday, driven by a sharp upgrade to annual economic growth forecasts by the government.

Latin American stocks rose slightly in early trade. Magazine Luiza jumped 5.9%, leading gains across Brazil stocks , after it said it will raise more funds and buy e-commerce company Kabum Comercio Eletronico for 1 billion reais ($196.53 million).

Comments

Comments are closed.