EMERGING MARKETS-Latam FX falls as strong U.S. jobs data revives hawkish Fed fears

BY Reuters | ECONOMIC | 12/02/22 03:39 PM EST

        *
      Mexican peso leads declines among Latam FX


        *
      Peru Congress backs motion to start impeaching Castillo


        *
      S.African rand up as Ramaphosa resignation plans denied



 (Updates prices)
    By Shreyashi Sanyal and Devik Jain
       Dec 2 (Reuters) - Latin American currencies fell on
Friday after a stronger-than-expected reading on U.S. employment
raised concerns about a hawkish Federal Reserve, while South
Africa's rand rebounded a day after rumors of President Cyril
Ramaphosa resigning shook markets.
    Mexico's peso dipped 1.5% against the dollar, leading
declines among central and south American currencies as prices
of its top export oil dropped ahead of an OPEC+ meeting on
Sunday and EU ban on Russian crude on Monday.
        J.P. Morgan said it
    does not expect a recession in Mexico
     in 2023 as resilient domestic demand should help offset the
negative impact from a "mild U.S. recession" until the end of
next year.

        Fears of a U.S. slowdown has picked up pace recently due
to aggressive monetary policy tightening adopted by the Fed to
tame inflation, which recently has showed signs of moderating.

    Data earlier in the day showed that U.S. employers added
more jobs than expected in November and raised wages,
potentially giving the U.S. central bank more reason to hike
interest rates.
    "Today's wage growth strength kind of runs in the face of
some of the recent improving inflation data that we have been
seeing. This doesn't make a trend, but it clearly has caught the
market and probably the Fed's attention," said Ryan Detrick,
chief markets strategist at the Carson Group.
        "The Fed could be a tad more aggressive with their rate
hikes in the near term."

    The Chilean peso shed 0.4%, while Brazil's real
 was down 0.6%.
        Brazil's President-elect Luiz Inacio Lula da Silva's
aide said on Friday the transitional government hopes to obtain
Congress approval for a minimum
    150 billion reais ($29 billion) waiver
     from the constitutional spending cap to meet campaign
promises.

        Concerns about the waiver proposal had rattled Brazilian
assets last month, with economists warning it could push public
debt to record levels and force the central bank to resume
interest hikes after it paused an aggressive monetary cycle to
tame inflation.

    Latin American currencies were set to end
their second straight week higher, while the region's stocks
index was set to snap a three-week losing
streak.
    Optimism over a downshift in aggressive monetary policy by
the U.S. Federal Reserve and that China will gradually reopen
its economy have bode well for riskier emerging market assets.
    South Africa's rand rose 1.1%, after falling some 4%
in the last two days. Ruling party officials failed to reach a
conclusion over whether Ramaphosa should stay in power after an
inquiry found evidence of misconduct.
    The Peruvian sol slipped 0.2% after its Congress
approved a motion initiated by opposition lawmakers to start
impeachment proceedings against President Pedro Castillo.
    Key Latin American stock indexes and currencies at 2010 GMT:
      Stock indexes               Latest    Daily % change
 MSCI Emerging Markets              974.66            -0.37

 MSCI LatAm                        2230.55            -0.26

 Brazil Bovespa                  112224.76             1.17
 Mexico IPC                       51257.91            -0.39
 Chile IPSA                        5290.76              0.3
 Argentina MerVal                169600.61           -0.588
 Colombia COLCAP                   1239.28             0.31

         Currencies               Latest    Daily % change
 Brazil real                        5.2165            -0.07
 Mexico peso                       19.4232            -1.55
 Chile peso                          881.9            -0.32
 Colombia peso                      4768.6            -0.19
 Peru sol                           3.8259            -0.25
 Argentina peso (interbank)       168.0800            -0.20

 Argentina peso (parallel)             308             1.62

 (Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru;
editing by Philippa Fletcher and Nick Zieminski)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article