Latin American currencies pop on China commodity demand hopes
Brazil industrial production falls
Mexico's President forecasts economic growth at 4%
Dollar firms after U.S. job growth data
Latam FX up 1%, stocks up 2.4%
Updates prices throughout; includes fresh analyst view, details on Citigroup CEO's views, Brazil's central bank on common currency
By Siddarth S, Amruta Khandekar and Ankika Biswas
June 2 (Reuters) -Latin American currencies gained on Friday, buoyed by hopes of improved demand from China, while the passage of a deal to lift the U.S. debt ceiling also boosted sentiment.
MSCI's Latam currencies index .MILA00000CUS gained 1%, set for two straight weeks of gains, boosted by evidence of strong economic growth in several Latin American countries and a private sector survey showing surprising factory activity growth in China.
The Brazilian real BRL= strengthened 0.9% to an over one-week high, extending gains to the second straight day as investors cheered the country's strong first-quarter economic growth.
"Despite believing that most of this activity boost is temporary, some evidence is suggesting potential spillovers to the rest of the economy, motivating another upward adjustment in our 2023 annual GDP growth estimate to 2.3% (from 1.0%)," analysts at Citi said in a note.
However, industrial production in Brazil fell more than expected in April,data showed, underscoring difficulties faced by the sector against a backdrop of high borrowing costs.
On the inflation front for major Latam countries, analysts at Scotiabank noted that price pressures are seen lower in Brazil, Chile, Colombia, and Mexico.
While for the first two discussion has centered around pinpointing exactly when in the next few months interest rate cuts could come, for the others it remains unclear when their policy rate pauses may end.
Meanwhile, Brazil's central bank chief expressed his opposition to the creation of a common currency, stating that in the era of digitalization it is unnecessary to have a shared currency for its purported benefits.
The U.S. dollar =USD edged higher in choppy trading after May's non-farm payrolls report showed employment surged but a jump in the unemployment rate capped the gains.
Mexico's peso MXN= edged 0.1% higher after President Andres Manuel Lopez Obrador said the country's economy could grow by 4% in 2023, while data showed the country's seasonally adjusted unemployment rate at 2.8% in April.
Meanwhile, Citigroup CEO Jane Fraser said scrapping the sale of its Mexican retail business known as Banamex and pursuing an initial public offering was in the best interest of shareholders.
The currency and the Colombian peso COP=, which advanced 1.2% and hit a near nine-month high, were also boosted by a jump in oil prices as both countries are major crude exporters.
Colombia's current account deficit shrank 36.3% in the first quarter, the central bank said, due to a reduced trade imbalance.
Chile's peso CLP=, the currency of the world's biggest copper exporter, gained 0.5% as copper prices rose on optimism around demand from China.
The Peruvian sol PEN= dropped 0.3% after Economy Minister Alex Contreras said he expects a "greater deceleration" of inflation in June and July.
The Latam equities index .MILA00000PUS jumped 2.4%, set to snap two weeks of losses, as the passage of a bill to lift the U.S. government's $31.4 trillion debt ceiling averted a catastrophic default.
Key Latin American stock indexes and currencies at 1820 GMT:
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 983.37 | 2.24 |
MSCI LatAm .MILA00000PUS | 2312.51 | 2.38 |
Brazil Bovespa .BVSP | 112195.44 | 1.47 |
Mexico IPC .MXX | 53089.03 | 0.69 |
Chile IPSA .SPIPSA | 5621.43 | 1.82 |
Argentina MerVal .MERV | 354525.43 | 0.326 |
Colombia COLCAP .COLCAP | 1143.64 | 2.3 |
Currencies | Latest | Daily % change |
Brazil real BRBY | 4.9642 | 0.85 |
Mexico peso MXN=D2 | 17.5323 | 0.09 |
Chile peso CLP=CL | 798.7 | 0.48 |
Colombia peso COP= | 4338.34 | 1.15 |
Peru sol PEN=PE | 3.6823 | -0.33 |
Argentina peso (interbank) ARS=RASL | 240.8000 | -0.23 |
Argentina peso (parallel) ARSB= | 485 | 1.03 |
Reporting by Siddarth S and Ankika Biswas in Bengaluru; Editing by Richard Chang and Hugh Lawson
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