Latin American currencies traded in tight ranges on Friday, as investors braced for central bank decisions from the United States and Brazil next week, with the Mexican markets coming under pressure from Pemex's weak results and worrying economic data.
The debt-heavy Mexican oil giant posted another quarter of major losses, weighed down by falling output and lower crude prices, as it faces the prospect of a fresh downgrade from credit agencies critical of its direction.
Mexico's peso slid 0.3%, while the MSCI's index of Latin American currencies was up 0.14%.
Investors are concerned about a Moody's downgrade on the company's debt to so-called junk status after Fitch moved to downgrade its bonds in June. A Moody's analyst said he expected Pemex to require more support from the government to avoid increasing its net debt.
"The key thing is stabilizing production, but it (Pemex)continues to bleed cash and capital expenditure is going to be large, which worries investors, given the sovereign support they're going to need going forward," said Jim Barrineau, head of emerging markets debt at Schroders.
"I think a downgrade is baked in the cake at this point."
Adding to worries, Latin America's second-largest economy contracted 0.4% in May from a year earlier, the national statistics agency said. The data followed a gloomy forecast for Latin America from the International Monetary Fund which forecast Mexico's economy to grow 0.9% this year, below its forecast of 1.6% three months ago.
After the European Central Bank failed to enthuse investors with a firm plan on monetary policy easing on Thursday, investors are looking ahead to the US Federal Reserve meeting next week, with traders already pricing in a 25 basis-point interest rate cut.
The Brazilian real held steady ahead of the country's central bank meeting next week, where, according to a Reuters poll of economists, the bank is expected to cut the benchmark interest rate to a record low to revive a struggling economy.
The Bovespa rose as shares of the largest domestic airline, Gol Linhas Aereas Inteligentes SA, jumped nearly 6% after the company reported higher demand for its flights in June, overshadowing losses for Petroleo Brasileiro after the state oil company lowered its 2019 production target.
Colombia's peso slipped after its central bank held interest rates steady at 4.25% for the fifteenth month running.
A bright spot was Argentine markets after data showed economic activity rose for the first time in over a year in May, a rare boost for President Mauricio Macri as he looks to dig the country out of a crippling recession ahead of presidential elections later this year.