Recession worries see Latam currencies mark bleak start to new quarter

* Chilean peso hits record low of 939.60 per dollar

* Mexican bonds to outperform Latam peers - BNY Mellon

* Peru's annual inflation hits highest since July 1997

* Latam stocks track Wall Street higher (Updates prices)

By Susan Mathew

July 1 (Reuters) - Latin American currencies fell sharply on Friday, with Brazil's real hitting its lowest level in almost five months and Chile's peso at a new record low, as worries that major economies will tip into recession sent investors to safe havens.

As major central banks prioritize inflation control, investors are starting to price in a hit to economic growth, and have started to favor safer assets like the dollar.

A surge in commodity prices due to sanctions on Russia was seen keeping assets of resource-rich Latin America buoyant. But with the recent slide in their prices combined with some regional political tensions, Latam assets have taken a beating.

Mexico's peso MXN= dropped 0.7% after having marked meager second quarter losses compared to other developing market currencies.

"We believe (Mexican bonds) will likely outperform in the region (in the second half of the year) because the ruling Morena party may have reached a stalemate in congress on energy reforms," said Daniel Tenengauzer, head of markets strategy at BNY Mellon, referring to a plan to tighten state control of the electricity market.

Brazil's real BRBY slid 1.4% with eyes on a stimulus package that could see the government breach its revised spending cap as President Jair Bolsonaro seeks to regain support ahead of elections in October.

The package, which includes cash payments to truck drivers, saw a 2.5 billion reais addition in benefits for taxi drivers on Friday. The Senate approved the package on Thursday and it now awaits approval from the Lower House, which is seen green-lighting the plan.

As copper and oil prices tumbled, exporter of the respective items, Chile and Colombia, saw their currencies lose 1.7% and 1.3% on Friday, with Chile's peso at a never been hit 939.60 per dollar.

Chilean Finance Minister Mario Marcel on Friday introduced a tax reform bill that increases copper mining royalties on companies that produce more than 50,000 tonnes a year and raises taxes on high-income earners to fund the government's proposed social programs and reforms.

Data on Friday showed Peru's annual inflation rate hit its highest level in a quarter of a century in June. Peru's central bank has raised the key interest rate 525 basis points since mid-2021 in a bid to tame inflation, which it expects to begin declining in July.

As Wall Street bounced, Latam stocks rose between 0.5% and 1.4%, marking a positive start to the second half of the year.

Key Latin American stock indexes and currencies at 1854 GMT: Stock indexes


Daily %

change MSCI Emerging Markets


-0.75 .MSCIEF



-0.39 .MILA00000PUS

Brazil Bovespa


0.51 .BVSP

Mexico IPC


0.57 .MXX

Chile IPSA


0.84 .SPIPSA

Argentina MerVal


1.376 .MERV

Colombia COLCAP


0.47 .COLCAP



Daily %

change Brazil real


-1.37 BRBY

Mexico peso


-0.72 MXN=D2

Chile peso


-1.47 CLP=CL

Colombia peso COP=


-1.28 Peru sol


-0.48 PEN=PE

Argentina peso


-0.18 (interbank) ARS=RASL

Reporting by Susan Mathew in Bengaluru; Editing by Alison Williams and Sandra Maler

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.