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U.S. Fed cuts by 25 bps
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Mexican President Sheinbaum has cordial first call with
Trump
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Economists see higher peak for Brazil's rates
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Argentina's Milei to meet with Trump next week in US
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MSCI's Latam stocks index up 0.8%, FX up 1.1%
(Updated at 2:44 p.m. ET)
By Ankika Biswas and Johann M Cherian
Nov 7 (Reuters) - Most Latin American currencies and
stocks logged strong gains against a weak dollar on Thursday, as
investor sentiment improved with the Federal Reserve's latest
interest-rate cut, while Mexico's peso hit a two-week high.
MSCI's Latam currencies index rose 1.1% to
an over three-week high. The dollar weakened after
Wednesday's biggest one-day jump in over two years as investors
closed out profitable bets following Donald Trump's presidential
victory, with bets of a Fed rate cut also weighing.
"Latin American central banks typically aim to follow the
Fed's monetary policy to avoid negative impact on currency
markets. Lower U.S. interest rates are likely to facilitate a
smoother path for rate reductions in Latam," said Eduardo
Moutinho, market analyst at financial technology firm Ebury.
The U.S. central bank delivered a widely expected
25-basis-point cut, as policymakers acknowledged an easing job
market and improving inflation trend.
However, traders have trimmed their bets of future rate cuts
on consistently robust economic data and after accounting for
chances of higher inflation stemming from Trump's proposed
tariffs and government spending.
Mexico's peso appreciated 1.1% to 19.86 against the
dollar, while local stocks also gained nearly 0.9% to an
over two-week high.
The peso had hit more than two-year lows of 20.8 and the
stocks index hit a one-year low on Wednesday after Trump's
comeback sparked fears that he could follow through on campaign
rhetoric around trade and immigration barriers that would hurt
the Mexican economy.
The peso ended Wednesday's choppy session flat, with some
analysts pointing to investors having already priced in Trump's
win. The currency had lost nearly 21% from April highs in the
run-up to Nov. 5.
"We remain optimistic about the peso. Mexico stands out as a
strong currency in the region, and the peso's future will partly
depend on whether Trump can effectively implement proposed
tariffs," Moutinho added.
Further, Mexican President Claudia Sheinbaum spoke with
Trump this morning, describing the telephone call as "very
cordial".
Colombia's peso was the top gainer among its regional
peers, up 2.5% to a two-week high, tracking an over 1% jump in
crude oil prices.
Top copper producer Chile's peso and Peru's sol
climbed 1.2% and 0.7%, respectively, boosted by an over
3% jump in prices of the red metal.
While Peru's interest-rate decision is due later in the day,
a Reuters poll showed Chile is expected to cut rates by 25 bps
in December.
On the flip side, Brazil's real was largely flat, a day
after Copom hiked interest rates by 50 basis points and left the
door open for further increases.
In contrast to the monetary policy easing by other Latam
central banks, Brazil's recent rate hike prompted economists to
raise their projections for borrowing costs at the end of its
tightening cycle.
Meanwhile, Argentina's libertarian President Javier Milei, a
political ally of Trump, will meet with U.S. president-elect
next week in the United States.
The country's main stocks index climbed nearly 2%,
hitting a fresh record high, with the MSCI Latam stocks gauge
rising 0.8%.
Key Latin American stock indexes and currencies:
MSCI Emerging Markets 1142.12 0.91
MSCI LatAm 2163.82 0.78
Brazil Bovespa 129720.18 -0.48
Mexico IPC 52177.02 0.86
Chile IPSA 6562.93 -0.25
Argentina Merval 2014963.18 1.94
Colombia COLCAP 1354.21 -0.74
Brazil real 5.682 -0.05
Mexico peso 19.863 1.1
Chile peso 948.8 1.2
Colombia peso 4300.86 2.52
Peru sol 3.75 0.69
Argentina peso (interbank) 993.5 -0.05
Argentina peso (parallel) 1100 3.18
(Reporting by Johann M Cherian and Ankika Biswas in Bengaluru;
Editing by Barbara Lewis and Lisa Shumaker)
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