EMERGING MARKETS-Mexican peso rises after rate hike, Latam FX afloat for the week

BY Reuters | ECONOMIC | 05/13/22 04:32 PM EDT
       * Latam stocks, FX eke out gains this week
    * Central banks in Mexico, Peru, Argentina hike interest
rates
    * Brazil antitrust regulator approves sale of Petrobras
refinery

 (Updates prices throughout, adds details)
    By Anisha Sircar
    May 13 (Reuters) - A gauge for Latin American currencies
rose on Friday as the dollar dipped, clawing back some gains in
a volatile week marred by risk-off sentiment on global growth
fears, while Mexico's peso strengthened after its central bank
hiked interest rates.
    Mexico's peso gained 0.7% against the dollar,
bouncing off one-week lows after the Bank of Mexico on Thursday
raised the benchmark interest rate by 50 basis points to 7.0%,
as expected.
    Peru's sol slipped 0.3% even after its own central
bank raised rates by 50 basis points to 5%, the tenth
consecutive hike as the copper-producing Andean nation battles
spiraling inflation.
    Argentina's central bank, too, announced a hike in the
benchmark interest rate by 200 basis points to 49% after data
earlier in the day showed inflation in the 12 months through
April was running at 58%.
    "Inflation has risen to levels dangerous, and the only way
in theory to combat that is raising rates, but central bank
action isn't determining the value of foreign currency
currently... We need global factors to come together for a more
positive Latam outlook, as everything is so downwardly revised,"
said Juan Perez, director of trading at Monex USA.
    MSCI's index of Latam currencies edged 0.1%
higher for the week, as it managed to keep its head above water
after the greenback saw a boost in late April on U.S. rate hike
expectations. Chile's peso and Colombia's peso
hovered near pandemic lows.
    "We're back to the levels of market fear and chaos as in the
beginning of the pandemic in 2020 - 2022 is another moment of
shock," Perez added, citing risks around China, rising U.S.
interest rates, slowing growth and the war in Ukraine.
    Latin American stocks were headed for a 0.1%
weekly gain by midday trading after a week which saw investors
moving away from riskier assets amid broader recessionary fears,
and were tracking their sixth straight week in the red.
    Headlines pointing to smoother commercial trade, new trade
patterns with Latin American countries or a resolution in the
Russia-Ukraine war could lift stocks in the weeks to come,
analysts say.
    Brazil's real, Chile's peso and Colombia's
peso were set for their fourth straight weeks in the red,
skidding between 0.1% and 1.2% on the week.
    Petrobras shares jumped 1.7%, boosting Brazil's
benchmark Bovespa. Brazil's antitrust watchdog CADE said
the sale of the state-run oil company's Reman refinery to fuel
distributor Atem was approved with no restrictions.

    Key Latin American stock indexes and currencies at 2014 GMT:

           Stock indexes                    Latest   Daily %
                                                     change
 MSCI Emerging Markets                      1005.54     1.79
 MSCI LatAm                                 2257.17     2.16
 Brazil Bovespa                           107160.51     1.39
 Mexico IPC                                49534.93     0.46
 Chile IPSA                                 4849.99     2.88
 Argentina MerVal                          88612.42    3.615
 Colombia COLCAP                            1512.12     0.42

               Currencies                   Latest   Daily %
                                                     change
 Brazil real                                 5.0576    -0.02
 Mexico peso                                20.1118     0.65
 Chile peso                                   860.3     0.50
 Colombia peso                              4103.45    -0.01
 Peru sol                                     3.788    -0.74
 Argentina peso (interbank)                117.4200    -0.14

 Argentina peso (parallel)                    200.5     1.50


 (Reporting by Anisha Sircar and Shreyashi Sanyal in Bengaluru
Editing by Alistair Bell)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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