Latam currencies, stocks slip ahead of Fed decision — TradingView News

Gauges of both Latin American currencies and stocks fell on Tuesday, with the Brazilian real weakening past 5 per dollar for a second day as investors awaited monetary policy news in Brazil, Mexico and the United States.

The U.S. Federal Reserve is widely expected to keep interest rates unchanged on Wednesday but more hawkish signals about the timing and extent of policy easing this year could make investors nervous.

Hotter-than-expected U.S. growth and inflation data this year have led investors to reduce bets on the number of Fed rate cuts this year, boosting the dollar.

MSCI’s index of Latam currencies touched a two-week low in early trading, before paring losses. The index was last down 0.1%.

“The U.S. data continue to come in mostly firmer and despite (Fed Chair) Powell’s recent dovish testimony before Congress, most Fed officials remain very cautious about easing too soon,” strategists at Brown Brother Harriman said.

“We believe that the current market easing expectations for the Fed still need to adjust. When they do, the dollar should gain further.”

MSCI’s index of Latin American stocks (.MILA00000PUS) dipped 0.6%, set to fall for the fourth consecutive session.

The Brazilian real USDBRL, (BRBY) edged up 0.1% ahead of a local rate decision on Wednesday where another 50 basis point rate cut is expected. However, it remained around the 5 per dollar level breached on Monday.

The Mexican peso USDMXN was flat after touching its strongest level in seven months last week. The Bank of Mexico’s interest rate stands at a historic high of 11.25%, and the monetary authority is expected to ease interest rates when it meets on Thursday.

“The peso remains extremely overvalued … versus other EM currencies and is vulnerable to a correction as interest rates decline,” Jon Harrison, managing director of EM macro strategy at TS Lombard said.

Chile’s central bank President Rosanna Costa said she expects interest rates to keep falling if economic factors and inflation remain stable. Chile’s peso USDCLP dropped 1.9% in its worst session since October.

Stock markets in the region were mixed, with Brazil’s Bovespa IBOV rising 0.6% and Mexico’s IPC index ME falling 1%.

Magazine Luiza MGLU3 fell 6.7% after the Brazilian retailer reported a 5.5% drop in quarterly net revenue, missing analyst estimates.

Braskem BRKM3 climbed 3.7% after the petrochemical producer reported a quarterly net loss of 1.58 billion reais ($317 million), narrowing from the 1.71 billion reais loss a year earlier.

Elsewhere in emerging markets, a group of Zambia’s international bondholders has signed a non-disclosure agreement with the government to discuss a $3 billion debt restructuring proposal, according to sources familiar with the situation.

Key Latin American stock indexes and currencies at 1930 GMT: