*
Foreigners pour $31 billion into EM portfolios in Aug, IIF
says
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Mexico's sweeping judicial overhaul formally takes effect
*
Peru economy expands for fourth straight month in July
*
Milei pledges to protect fiscal balance in budget speech
*
FX up 0.6%, stocks add 0.8%
By Ankika Biswas
Sept 16 (Reuters) - Most Latin American stocks and
currencies rose in early trading on Monday, as emerging market
assets rode the prospects of an outsized Federal Reserve
interest rate cut, while Israel's shekel and shares slid on talk
that Netanyahu may dismiss his defence minister.
The MSCI index for Latam currencies was at a
near one-month high, with the broader EM currencies gauge
scaling a lifetime high on the day. The regional
stocks index also climbed 0.8%.
Both Latam indexes logged weekly gains on Friday, due to
strong expectations of a September U.S. rate cut. With markets
gearing up for an all-but-certain Fed cut, the question remains
the size of such a move. LSEG data shows market bets are largely
inclined toward a 50-basis-point cut on Wednesday.
Lower U.S. rates could give EM central banks more room for
manoeuvre to ease themselves and support domestic growth,
barring the volatility and uncertainty around November's U.S.
presidential election. Latin American countries are some of the
major EMs that have already started a rate-cut cycle before the
Fed.
"Whether it will be a 25-bps or 50-bps cut in the Fed funds
rate, we really need to know more about where the rate will
settle in a year or so from now," said Steven Major, global head
of fixed income research at HSBC.
"By September 2025 the Fed funds futures imply almost 250
bps of rate cuts and the maximum for this cycle is just a tad
more, according to the January 2026 Fed funds futures."
Brazil's real was the top Latam currency gainer,
strengthening 1% against the dollar to a near three-week high,
with investors also awaiting the country's inflation figures due
on Tuesday.
On the flip side, the Mexican peso slipped 0.5%,
set to snap a three-day winning streak, after having touched its
highest level since Aug. 26 in early trade. The local equity
market was closed on account of Independence Day.
Mexico's judicial reform overhauling the country's courts,
which will allow voters to elect judges, officially took effect
on Sunday, marking a major legislative victory in President
Andres Manuel Lopez Obrador's final weeks in office.
Among other Latam currencies, Chile's peso rose
0.5% against the dollar, boosted by strong copper prices.
Colombian peso rose 0.2%, due to a jump of around 2% in
oil prices.
Peru's sol slipped 0.1%. Data showed Peru's economy
expanded for the fourth month in a row in July fueled by all
sectors except agriculture, continuing the country's recovery
following a recession last year.
In Argentina, President Javier Milei said during a
presentation to Congress on Sunday on the 2025 budget that he
would defend his government's commitment to maintaining fiscal
balance and veto all bills that threaten it.
Meanwhile, data from a banking trade group showed foreign
investors ploughed a net $30.9 billion into EM stocks and debt
portfolios in August.
Elsewhere, talk that Israeli Prime Minister Benjamin
Netanyahu was considering firing Defence Minister Yoav Gallant,
something denied by Netanyahu, sent Israeli financial markets
lower, dealers highlighted.
The shekel weakened nearly 1% against the dollar,
while the main stock index fell 1.5% to a near
one-month low.
Key Latin American stock indexes and currencies at 1400 GMT:
Equities Latest Daily % change
MSCI Emerging Markets 1087.13 0.45
MSCI LatAm 2265.8 0.76
Brazil Bovespa 135665.86 0.58
Mexico IPC 52016.85 0.03
Chile IPSA 6343.58 -0.12
Argentina Merval 1817734.05 0.0
Colombia COLCAP 1316.12 0.34
Currencies Latest Daily % change
Brazil real 5.508 1.01
Mexico peso 19.2768 -0.47
Chile peso 921.3 0.51
Colombia peso 4177.46 0.17
Peru sol 3.776 -0.11
Argentina peso (interbank) 961 -0.156087409
Argentina peso (parallel) 1245 2.81124498
(Reporting by Ankika Biswas in Bengaluru)
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