EMERGING MARKETS-Latam currencies up as dollar weakens ahead of Powell’s testimony

By Amruta Khandekar and Ankika Biswas

March 6 (Reuters) – Latin American currencies gained steam against a softer dollar on Monday, the eve of Federal Reserve Chair Jerome Powell’s testimony which investors will watch for clues on future U.S. rate hikes, with Colombia’s peso rising for the fourth straight session.

MSCI’s index for Latam currencies .MILA00000CUS was up 0.7% by 2014 GMT while the broader EM currencies gauge .MIEM00000CUS was flat.

Powell is set to testify before Congress on Tuesday and Wednesday. Investors will watch for clues on monetary policy plans. In February, concern that U.S. interest rates would stay higher for longer hurt risk sentiment.

Recent commentary from other Fed officials has calmed jitters, with markets now pricing in three 25-basis-point rate hikes.

“We are moving towards an expectation for tighter rates,” said Cristian Maggio, head of portfolio strategy at TD Securities.

“There could be a risk that (Powell’s) rhetoric will push interest rates to the upside.”

The Chilean peso CLP= was up 0.7%, with central bank Chief Rosanna Costa highlighting that rising consumer prices have not yet reached the target, further tempering expectations of interest rate cuts.

The Colombian peso rose 1.7% against the dollar to hit a one-month high.

Colombia’s consumer prices rose 1.66% in February, the country’s DANE statistics agency announced on Saturday, taking cumulative 12-month price growth to 13.28%.

The Brazilian real Y> was flat, while Mexico’s peso MXN= slipped 0.3% from five-year highs touched in the previous session driven by a widening rate differential between Banxico and the Fed.

The Chilean peso CLP= rose 0.7% against the greenback.

Argentina’s Economy Minister Sergio Massa said the country is launching a voluntary swap program of domestic debt, aimed to “give predictability” to the market with “allied banks” to improve access to credit.

Investors await inflation data from Chile, Brazil and Mexico this week as they try to gauge how close central banks in the region are to ending their tightening cycle.

Latam stocks .MILA00000PUS were up 0.8%, with Argentina’s Merval index .MERV rising 2.7%.

The inflation rate in Argentina is seen hitting 99.9% in 2023, speeding up from last year’s rate and topping previous estimates which saw a slightly slower rise, according to a central bank poll of analysts released Friday.

Brazil’s Bovespa .BVSP edged 0.8% higher, boosted by an 40.8% advance in Azul SA AZUL4.SA after the airline projected positive cash flow in 2024 and beyond. Mining stocks like Vale SA VALE3.SA fell tracking lower metal prices after China set a modest target for economic growth this year of around 5%.

Shares of Azul’s peer Gol Linhas Aereas Inteligentes SA GOLL4.SA also jumped 24.2%.

Key Latin American stock indexes and currencies at 2014 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

993.53

0.56

MSCI LatAm .MILA00000PUS

2233.07

0.8

Brazil Bovespa .BVSP

104770.67

0.87

Mexico IPC .MXX

53955.40

-0.42

Chile IPSA .SPIPSA

5427.52

-0.22

Argentina MerVal .MERV

252470.50

2.687

Colombia COLCAP .COLCAP

1225.17

0.87

Currencies

Latest

Daily % change

Brazil real BRBY

5.1654

0.07

Mexico peso MXN=D2

18.0072

-0.36

Chile peso CLP=CL

797.8

0.73

Colombia peso COP=

4702.25

1.75

Peru sol PEN=PE

3.77

0.03

Argentina peso (interbank) ARS=RASL

199.3400

-0.53

Argentina peso (parallel) ARSB=

368

1.90

(Reporting by Amruta Khandekar; Editing by Emelia Sithole-Matarise and David Gregorio)

((Amruta.Khandekar@thomsonreuters.com;))

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