Latam FX eyes strong monthly gain on metals boost
Colombia cbank board faces dilemma over magnitude of rate cut
Brazil private economists forecast two 50-bps hikes this year
Chile's president proposes 2.7% spending increase in 2025 budget
Latam FX down 0.4%, stocks down 0.6%
By Ankika Biswas
Sept 30 (Reuters) -Colombia's peso rose in line with most of its regional peers on Monday, ahead of the country's monetary policy decision, with an index tracking Latin American currencies on course for its biggest monthly advance in ten riding on a metal prices rally.
The Colombian peso COP= edged up 0.2% against the dollar, with the local interest rate decision scheduled for 2 p.m. ET (1800 GMT).
Uncertainty around local inflation pressures could see the board of Colombia's central bank be split over the magnitude of a possible rate cut. A Reuters survey showed analysts forecast either a 50-basis-point cut to 10.25%, or a 75-bps one.
Jamaica's interest rate decision is also due later in the day.
These follow a 25-bps rate hike by Brazil and a 25-bps cut by Mexico this month.
A survey showed Brazil's private sector economists now project a more restrictive path for interest rates, with two 50-basis-point hikes expected this year and higher borrowing costs next year.
Brazil's real BRL= was down 0.5% on the day, but was the top Latam currency performer for the month with a near 3% jump against the greenback.
"Fears (of sovereign debt load) returned in mid-2024 as revenues fell short and expenditures stayed high. A conservative central bank is now keeping monetary policy tight to push back against the risk of expansive fiscal policy and rising inflation expectations," Macquarie strategists noted.
"But there's a risk that the BCB becomes structurally more dovish after 2024, with the coming BCB leadership change. Two-way risks seem to be pronounced, but skewed toward higher USD/BRL as commodity prices (oil, iron) fall."
Further, data showed the country's public sector posted a larger-than-expected deficit in August, driven by a mismatch between central government revenues and expenditures.
The MSCI index for Latam currencies .MILA00000CUS was set for its best month since last November, despite slipping into the red for the day from an over one-week high. The stock index .MILA00000PUS eyed its third straight monthly advance.
The strength in the Latam asset classes has been fuelled by optimism around a Federal Reserve interest-rate cut and soaring metal prices on the back of top consumer China's stimulus measures that have shored up the metals demand outlook.
Top copper producers Chile's peso CLP= and Peru's sol PEN= also enjoyed monthly gains on the back of the recent rally in the red metal's prices.
Chile's government is proposing a 2.7% annual increase in its 2025 budget, President Gabriel Boric said, adding plans to boost pensions, healthcare and focus on increasing national security.
Meanwhile, Argentine President Javier Milei intends to shake up the country's mid-term legislative elections next year, as the country battles its worst economic crisis in decades.
Key Latin American stock indexes and currencies at 1433 GMT:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1171.99 | -0.22 |
MSCI LatAm .MILA00000PUS | 2246.95 | -0.57 |
Brazil Bovespa .BVSP | 132717.18 | -0.01 |
Mexico IPC .MXX | 52630.23 | -0.28 |
Chile IPSA .SPIPSA | 6513.5 | -0.26 |
Argentina Merval .MERV | 1727776.56 | NULL |
Colombia COLCAP .COLCAP | 1314.79 | -0.46 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4623 | -0.54 |
Mexico peso MXN= | 19.6311 | 0.36 |
Chile peso CLP= | 897.75 | 0.21 |
Colombia peso COP= | 4171.34 | 0.16 |
Peru sol PEN= | 3.7056 | -0.22 |
Argentina peso (interbank) ARS=RASL | 969 | -0.206398349 |
Argentina peso (parallel) ARSB= | 1225 | 0.408163265 |
Reporting by Ankika Biswas in Bengaluru, editing by Ed Osmond
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