Polish zloty slides on c.bank uncertainty; Latam currencies fall
By Susan Mathew
Oct 6 (Reuters) - Latin American currencies fell on Thursday, with Colombia's peso hitting a three-month low as the dollar surged, while the Polish zloty dropped 1.3% after the central bank said monetary policy was in "wait-and-see" mode.
The dollar regained momentum with investors now looking to U.S. non-farm payrolls (NFP) data on Friday to make bets on whether it would sway the Federal Reserve's aggressive monetary policy tightening path.
Fed members have this week called for more interest rate hikes and sustained restrictive policy till inflation can be brought to the central bank's 2% target.
Risk assets have taken a hit this year as major central banks hike interest rate aggressively to curb inflation, risking a recession and diverting capital flows to safe-havens.
"Given extreme sentiment, we may be in for another bear market rally in risky assets, though in the big picture we doubt that the peak in the USD is in," said strategists at Citi Research.
"A bear market rally in U.S. rates could also continue, which may create an opening for some EM rates where central banks get ready to end the cycle.... We need to see a weaker NFP print to keep the more positive momentum going."
Colombia's peso COP= lost 0.8% to lead losses among regional peers, while falling copper prices saw top producer Chile's peso CLP= move further away from two-week highs.
In Colombia, Citi strategists noted uncertainty stemming from a series of tweets by President Gustavo Petro on Wednesday on monetary policy and inflation.
Chile's central bank is expected to hike the country's benchmark interest rate to 11.25% from the current 10.75% at its October meeting, a poll of traders showed on Thursday.
The Polish zloty EURPLN= was on course for its worst session in more than three months against the euro after central bank head Adam Glapinski said monetary policy tightening cycle hasn't officially ended yet, and awaits the next inflation projection to determine policy stance. He reiterated that the bank could embark on interest rate cuts at the end of 2023.
The moves come after the key interest rate was kept unchanged on Wednesday against expectations of a 25 basis points hike.
Currencies of Brazil BRBY and Mexico MXN= were flat.
Brazil's real is set for a bumpy ride ahead of the country's election runoff later this month, a Reuters poll showed. Brazil markets had surged on Monday following the first-round results which showed a surprisingly good performance by far-right President Jair Bolsonaro.
Ahead of the Oct. 30 run-off, leftist rival Luiz Inacio Lula da Silva maintains a clear lead over Bolsonaro, a poll showed.
Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell
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