*
Mexican economy up 1.1% y/y in August- preliminary
estimate
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South Africa joins easing club with 25 bps rate cut
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Turkish central bank keeps rates steady, alters guidance
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Latam FX up 0.3%, stocks up 0.2%
By Ankika Biswas
Sept 19 (Reuters) - Brazil's real outperformed its
regional peers on Thursday after the central bank kicked off an
interest rate-hiking cycle and signaled more increases, while
key indexes for Latin American assets climbed after an outsized
U.S. rate cut overnight.
The real hit a one-month high, strengthening 1%
against the dollar, following an expected 25-basis-point rate
hike and as the central bank hinted at upcoming rises to tackle
a challenging inflation outlook driven by stronger-than-expected
economic activity.
The rise in the benchmark Selic interest rate for the first
time in over two years also comes in the face of the Federal
Reserve's larger-than-usual 50-bps cut and projections of
another half-a-percentage-point cut by year-end.
This widens the interest rate differential between Brazil
and the U.S., likely supporting the real by attracting capital
inflows and easing inflationary pressures through lower import
prices.
"The fiscal framework remains vulnerable but, for now, we
think authorities have done enough to calm markets on this front
as risks for 2024 have subsided. The BCB is in a hiking cycle,
building carry back into the FX while the rest of the world is
easing rates," Barclays analysts noted.
The analysts recommended staying bullish on the real versus
the dollar, owing to policy divergence.
The real's gains helped the MSCI gauge tracking Latam
currencies to gain 0.3% to a one-month high,
while weakness in the Colombian peso and Peru's sol
capped gains in the index.
On the data front, a preliminary estimate showed Mexico's
economy likely expanded 1.1% in August compared with the same
month a year earlier. The Mexican peso edged 0.1% lower
against the dollar.
The MSCI Latam stocks index was up 0.2%,
rising for the seventh straight session, led by strong gains in
Argentine stocks.
Elsewhere, South Africa took a measured tone after its first
rate cut in more than four years, saying although inflation had
fallen faster than expected there were still risks to the
outlook.
Turkey held its main interest rate steady at 50% for a sixth
straight month, as expected, saying it remained highly attentive
to inflation risks but removing a reference to potential
tightening.
While the lira was little changed against the
dollar, the main Istanbul stock index climbed 2%.
Among other policy decisions, Angola left its main interest
rate unchanged at 19.50% after inflation started easing last
month, while Ukraine kept its key rate unchanged at 13% for the
second consecutive time and said it expected inflation to
continue to increase in the coming months.
Key Latin American stock indexes and currencies at 1500 GMT:
Equities Latest Daily % change
MSCI Emerging Markets 1099.51 1.08
MSCI LatAm 2281.44 0.61
Brazil Bovespa 134220.51 0.35
Mexico IPC 52762.9 0.34
Chile IPSA 6323.95 -0.36
Argentina Merval 1850185.36 1.92
Colombia COLCAP 1312.04 0.37
Currencies Latest Daily % change
Brazil real 5.4104 0.96
Mexico peso 19.305 -0.11
Chile peso 930.35 0.2
Colombia peso 4186.5 -0.46
Peru sol 3.7497 -0.35
Argentina peso (interbank) 962.5 0
Argentina peso (parallel) 1240 2.419354839
(Reporting by Ankika Biswas in Bengaluru)
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