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

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.