By Niket Nishant
Dec 19 (Reuters) – Latin American currencies rose on Friday, led by gains in the Colombian peso as investors awaited the central bank’s final meeting of the year, where it is expected to keep interest rates unchanged.
The peso gained nearly 1% against the dollar. Elevated interest rates tend to boost the appeal of a currency, particularly when a weaker U.S. dollar sends investors hunting for higher-yielding opportunities.
The Colombian stock benchmark inched 0.3% higher, but was on track for its biggest weekly loss since May.
The MSCI index tracking regional currencies rose 0.1%, while the corresponding equities gauge rose 0.4%.
The moves cap a volatile week for the assets, which were buffeted by a heavy slate of monetary policy decisions and domestic political factors.
Tensions between the U.S. and Venezuela are also looming over the region, with any escalation likely to ripple through markets. Regional heavyweights Brazil and Mexico have called for restraint, but their stance risks stoking Washington’s ire.
POLITICS, ECONOMIC DATA DRIVE SENTIMENT
In Brazil, domestic political risks have come to the fore in recent weeks. President Luiz Inacio Lula da Silva said on Thursday he was “sensing” that interest rates could start to come down soon, but central bank chief Gabriel Galipolo said policymakers would stick to a data-dependent approach.
Lula also said he will veto a bill passed by the country’s Congress to cut former President Jair Bolsonaro’s 27-year prison sentence.
The real climbed 0.3% on Friday, but was poised to end the week 1.6% lower. The Bovespa index gained 0.5% on Friday, after data showed that foreign direct investment inflows beat expectations in November.
Argentine equities rose 0.5%, a day after data showed that the country’s trade surplus in November was above expectations.
The unemployment rate also dropped to 6.6% in the third quarter from 6.9% a year earlier. The peso was 0.1% lower.
Chilean stocks jumped 1.1%, thanks in part to the price of copper rallying to a near record high. The metal, widely used in power, construction and manufacturing, is Chile’s top export.
“Sentiment on Argentinian assets remains constructive, while Chile continues to be the preferred Andean market. However, copper prices remain the main risk for the region,” analysts at BofA Global Research wrote in a note.
Meanwhile, Mexico’s stock benchmark and the local peso were largely unchanged. The central bank lowered interest rates by 25 basis points on Thursday.
Key Latin American stock indexes and currencies:
Equities
Latest Daily %
change
MSCI Emerging Markets 1368.57 0.76
MSCI LatAm 2675.76 0.43
Brazil Bovespa 158756.22 0.53
Mexico IPC 63782.18 -0.04
Chile IPSA 10310 1.14
Argentina Merval 3177669.76 0.457
Colombia COLCAP 2061 0.29
Currencies
Latest Daily %
change
Brazil real 5.5041 0.32
Mexico peso 18.002 -0.04
Chile peso 908.73 0.18
Colombia peso 3817.57 0.97
Peru sol 3.3647 0.05
Argentina peso (interbank) 1453 -0.14
Argentina peso (parallel) 1460 2.05
(Reporting by Niket Nishant in Bengaluru; editing by Mark Heinrich)
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