Brazil's real rises on rate hike prospects; Latam stocks rally
By Susan Mathew
July 26 (Reuters) - A weakening dollar helped an index of emerging markets cut a chunk of its losses on Monday, with Brazil's real leading gains among some Latin American currencies on the possibility of rising interest rates there.
Stocks in the region .MILA00000PUS also rallied, outperforming peers elsewhere .MSCIEF that took a hit over tighter government rules in China.
MSCI's index of EM currencies .MIEM00000CUS fell up to 0.26% on the risk-off mood, but as the dollar weakened ahead of the Federal Reserve's policy decision on Wednesday, EM currencies found footing, with South Africa's rand ZAR= moving away from March lows, while Russia's rouble RUB= erased all of its losses.
Brazil's real BRBY reversed early losses, rising 0.6%. A survey on Monday showed consumer confidence in Brazil rose in July to a nine-month high, a fourth consecutive increase.
Meanwhile, a central bank survey showed Brazilian interest rates are expected to hit 7.00% this year as inflation rises. The benchmark Selic rate is currently at 4.25%.
These positive headlines helped investors look past continued protests to impeach President Jair Bolsonaro who faces reelection next year. Increasing political uncertainty has seen the currency fall about 3% from the 2021 highs hit last month.
"Although the government is already taking measures to improve its popularity/relationship with Congress, it would be important to monitor the impact of these demonstrations on the next polls," strategists at Citi said.
Mexico's peso MXN= rose 0.1% as oil prices improved, but rising coronavirus cases kept a lid on gains. The total number of infections approached 3 million, with hospital occupancies in Mexico City and its suburbs increasing by a third.
Investors are worried about renewed global economic fallout from a new wave of the pandemic.
The United States will not lift any existing travel restrictions "at this point" due to concerns over the highly transmissible COVID-19 Delta variant and the rising number of U.S. coronavirus cases, a White House official told Reuters.
Rising copper prices buoyed exporter Peru's sol PEN= , but Chile's peso CLP= extended losses to a third straight session, hitting eight-month lows as the focus slowly turns to general elections in November.
Miners were among the biggest gainers across Latam bourses on Monday as copper and iron ore prices rose. Mexico's IPC index extended gains to a fifth straight session.
Key Latin American stock indexes and currencies at 1420 GMT: Stock indexes
change MSCI Emerging Markets
change Brazil real
Colombia peso COP=
-0.08 (interbank) ARS=RASL
Reporting by Susan Mathew in Bengaluru Editing by Paul Simao
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.