Latin American currencies weakened across the board on Thursday on lower commodity prices and heightened speculation that a Federal Reserve interest rate hike could come as early as next month. St. Louis Federal Reserve President James Bullard joined a chorus of policymakers highlighting the odds that the US central bank could increase rates at least twice this year.
Bullard said another hike "may not be far off," leading some to speculate that a move could take place as soon as April. Some traders believed he meant to shift bets in financial markets, which currently imply a single rate increase this year. Higher US rates could draw funds away from emerging markets, which now benefit from a wide interest rate spread. A stronger US dollar also weighed on raw material prices, depressing the currencies of major commodity exporters.
That hurt currencies such as copper-rich Chile's peso , while the Mexican peso followed crude prices lower. Record high US crude stockpiles also helped drag oil prices toward their first weekly loss in over a month. Volumes were thin ahead of the Easter holiday, with Colombian markets closed for Holy Thursday. In Brazil, traders were also cautious ahead of expected developments in the country's worst political crisis in two decades. "We have plenty of reason to take the foot off the gas pedal," said Paulo Celso Nepomuceno, a fixed-income strategist with the Coinvalores brokerage in S?o Paulo. The biggest party in President Dilma Rousseff's congressional coalition could decide to jump ship next Tuesday, possibly heightening the chances of her ouster.
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