Brazil's real surged to an eight-month high on Friday, prompting the country's central bank to step up intervention to derail the rally, while Colombia and Mexico's pesos also hit their strongest levels this year. Dovish signs from the US Federal Reserve have fueled strong gains in Latin American currencies this week.
The dollar index, a measure of the greenback's value against a basket of currencies, was on course for its third consecutive monthly decline for the first time in five years. Investors have pared their bets on multiple interest rate hikes this year after the US economy nearly ground to a halt in the first quarter. This helped to drive demand for higher-yielding emerging market assets.
Brazil's central bank, in its first intervention in a week, offered up to $2.5 billion in reverse currency swaps in three auctions after the real hit 3.45 per dollar. Other Latin American currencies also strengthened. The Mexican peso rose more than 0.5 percent to a four-month high on stronger-than-expected first-quarter preliminary GDP data for the region's No 2 economy.
"The dollar trend remains bearish. The (Brazilian) central bank came in and it continued to fall (against the real) anyway," said Glauber Romano, trader at brokerage Intercam. Colombia's peso jumped nearly 1 percent to close at its strongest since early November. After the market close, Colombia's central bank unexpectedly increased its benchmark interest rate by half a percentage point to stem rising inflation.
Latam stock markets were also firmer, with the broader MSCI Latin American stock index up 0.4 percent, as commodities prices gained. Shares of Mexican media group Televisa SAB jumped more than 8 percent after the company reported solid sales growth despite a 59-percent drop in first-quarter profit. A sharp drop in shares of planemaker Embraer SA capped gains in Brazilian stocks. Shares of the world's third-largest commercial jet maker fell nearly 4 percent after a decline in profit margins in the first quarter.
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