EMERGING MARKETS-Latam FX down , Brazil belongings tumble as fiscal considerations persist

EMERGING MARKETS-Latam FX down , Brazil belongings tumble as fiscal considerations persist

* Mexican retail gross sales flat in August
* Inflation fears weigh on FX

By Ambar Warrick
Oct 21 (Reuters) – Brazil’s actual tumbled to a six-month low
on Thursday as considerations over fiscal spending had been compounded by
weak sentiment, with most different Latin American currencies
falling as inflation fears prompted buyers to keep away from
risk-driven belongings.
The true dropped 1.4% after economic system minister Paulo
Guedes opened the door to a one-off breach of a constitutional
spending cap to pay for an even bigger welfare program proposed by
Brazilian President Jair Bolsonaro.
Guedes’ feedback appeared to contradict earlier assurances
from Bolsonaro that Brazil might enhance payouts with out
stretching its strict fiscal guidelines.
Fears of a better finances deficit within the nation, which in
flip might damage monetary credibility, had rattled monetary
markets earlier this week.
Brazilian shares fell 1.7%.
Brazil, and most different rising market economies have been
grappling with excessive inflation this yr, pushed by rising gas
prices and disruptions in world commerce brought on by the COVID-19
Mexico’s peso fell 0.3% off a more-than-three-week
excessive as information confirmed retail gross sales stayed flat in August from
July, pressured by current value will increase. Mexico and Brazil,
Latin America’s largest economies, are largely consumer-driven.

“The near-term outlook for family consumption of products
and providers is constrained by the weak credit score/financial institution lending
dynamics and excessive inflation and rates of interest,” analysts at
Goldman Sachs wrote of Mexico.
“Nevertheless, we count on the ahead momentum to stay constructive
in 2H2021 in tandem with progress on the vaccination entrance,
anticipated gradual enchancment of the labor market backdrop, and
constructive spill-overs from the U.S.,” the analysts wrote.
A pullback in oil costs additionally weighed on Mexico’s peso,
whereas crude exporter Colombia’s foreign money fell 0.5%.
Peru’s sol fell barely, with political uncertainty
creeping into markets forward of a key vote in Congress on a brand new
Cupboard subsequent week.
Nonetheless, the sol had rallied in current classes after
President Pedro Castillo’s current Cupboard overhaul was seen as
extra reasonable.
Elsewhere, Turkey’s lira slumped to document lows after
the central financial institution reduce rates of interest by twice as a lot as anticipated
to 16%, regardless of inflation nearing the 20% mark within the nation.

The reduce is seen as an extension of President Tayyip
Erdogan’s view on financial coverage, which has been characterised
as unorthodox. He has changed three central financial institution governors in
the previous two years.

Key Latin American inventory indexes and currencies:

Newest Every day % change
MSCI Rising Markets 1293.57 -0.58

MSCI LatAm 2172.76 -2.52

Brazil Bovespa 108908.01 -1.7

Mexico IPC 51696.44 -1.15

Chile IPSA 4060.83 0.58

Argentina MerVal – –

Colombia COLCAP 1413.96 -0.01 Currencies Newest Every day % change
Brazil actual 5.6386 -1.37

Mexico peso 20.2592 -0.31

Chile peso 817.4 -0.46

Colombia peso 3784.53 -0.50
Peru sol 3.9382 -0.04

Argentina peso 99.3600 0.00

(Reporting by Ambar Warrick; enhancing by Jonathan Oatis)

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