Brazil, Mexico and Chile leverage weak dollar, while Argentina and Peru’s currencies slip deeper

RIO DE JANEIRO, BRAZIL – Latin American markets closed mixed on Tuesday, with gains in Brazil, Mexico, and Chile taking advantage of a global weak dollar after economic data from the United States and China supported an appetite for risk assets. At the same time, Colombia, Argentina, and Peru posted losses.

Analysts fear that a rapid global recovery supported by the Covid-19 vaccination process and monetary and fiscal stimulus will lead to a pickup in inflation in the world’s largest economy.

“Investors continue to evaluate the inflation scenario (in the U.S.) to validate an economic recovery, and therefore, an adjustment in the monetary policy outlook,” Monex said in a report.

The Chilean peso rose the most, with 0.52%, to 708.20/708.50 units per dollar, also favored by an advance in the price of copper, the country’s largest export. However, the IPSA benchmark of the Santiago stock exchange closed with a 0.97% drop, at 4,901.91 points.

The peso gained 0.18% to 20.0920 units per dollar in Mexico, and the benchmark domestic stock index, the S&P/BMV IPC, rose 0.32% to 47,503.71 points.

The Brazilian real climbed 0.14% to 5.7175 units, and the Bovespa stock exchange index gained 0.41%, surpassing 119,000 points for the first time in almost two months, favored by the positive bias on Wall Street.

However, investment bank JPMorgan on Tuesday recommended selling emerging market currencies, a complete reversal from its estimate earlier in the year when it was backing them on the back of strong performance.

Many large banks have turned more bearish as rising Treasury yields, Covid-19 concerns, and idiosyncratic risks plaguing Turkey and Russia weigh on confidence.

The Colombian peso ended down 0.10% in its third session of losses. At the same time, the benchmark stock market index, COLCAP, fell 0.40%, in a market awaiting the forthcoming presentation of tax reform before Congress, which would include, among other points, an increase in the tax on dividends.

In Argentina, the peso devalued by 0.05%, and the S&P Merval stock index ended with a 0.89% drop amid investors’ disinterest in a reduced business market in the face of a growing second wave of COVID-19, with restrictions that put the weakened local economy in check, according to traders.

The Peruvian sol dropped 0.39%, in a market attentive to the positions taken by the candidates that went to the second round, where the leftist candidate Pedro Castillo, the surprise finalist in the elections, said that the runoff to define the presidency with the right-wing Keiko Fujimori would be “a competition between the rich and the poor”.

Source: America Economia