Mexican and Colombian Pesos Lead Emerging Market Currency Decline

The Mexican and Colombian pesos weakened on Wednesday, dragging down emerging market currencies. The dollar strengthened as optimism about China’s stimulus measures waned.

Emerging market currency index erased earlier gains of up to 0.3% and traded with little change. China’s central bank cut its one-year policy loan rate to a record low.

This move followed a series of stimulus measures announced on Tuesday. However, the latest action failed to sustain a rally in commodity prices that had boosted Latin American currencies the previous day.

The Mexican peso weakened by up to 1.6% against the US dollar on Wednesday, hitting session lows. Moody’s Ratings commented that the recently approved judicial reform could directly affect the nation’s credit rating.

Electoral risks in the US and increased political uncertainty in Mexico have pressured the peso. Market participants are also considering a pessimistic outcome from Thursday’s central bank meeting.

Mexican policymakers are expected to cut interest rates after the country’s headline inflation slowed more than anticipated in early September.

The MSCI emerging market equity index advanced 0.3%, extending its longest winning streak since early July. The index continues to trade at its highest level in over two years. It is heading towards a monthly gain after closing August in the red.

Argentina’s government might combine the last two staff-level reviews of the current $44 billion IMF program into one.

They would then proceed with negotiations for a new program, taking three to six months. Economy Minister Luis Caputo shared this information in a closed-door presentation at JPMorgan Chase & Co. offices in New York.

Mexican and Colombian Pesos Lead Emerging Market Currency Decline

Sri Lanka’s new president, Anura Kumara Dissanayake, dissolved the nation’s parliament effective midnight Tuesday.

He called for early elections, ordering parliamentary elections to be held on November 14. The new legislature will convene on November 21. The country’s dollar bonds are among Thursday’s top percentage yielders.

The International Monetary Fund’s executive board will review its new $7 billion loan program for Pakistan today.

This comes after the nation secured over $2 billion in financing and guarantees from lenders. For Bangladesh, the Washington-based lender has agreed to expedited financial assistance.

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