Emerging Markets: Mexican peso slips as markets digest Banxico's dovish tilt

Companhia de Saneamento Basico do Estado de Sao Paulo - SABESP

27/06/2024 21:32

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      Brazil lifts 2025 inflation projections to 4%
    

        * 
      Brazil's Suzano up on dropping plan to buy International
Paper
    

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      Bank of Mexico holds key interest rate at 11%
    

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      Rand drops on reported discord over cabinet posts
    

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      FX off 0.4%, stocks up 0.1%
    

  
 (Updated at 03:55 p.m. ET/ 1955 GMT)
    By Johann M  Cherian and Shristi  Achar A
       June 27 (Reuters) - 
    Most Latin American currencies slipped on Thursday, with the
Mexican peso falling for the third session, after its central
bank left the key interest rate unchanged but acknowledged
progress on the inflation front. 
  
    Mexico's peso  MXN=  lost 0.4% as the Bank of Mexico
(Banxico) held its benchmark interest rate steady at 11.00% in a
split decision, and said it expects the country's disinflation
process to continue. 
    "They're essentially not placing too much weight on the
potential for inflationary pressures as a result of the
weakening of the Mexican peso post-election," said Christian
Lawrence, senior market strategist, LatAm FX at Rabobank.
        "That is interesting because it certainly tilts the
balance towards rate cuts definitely still coming this year."
  
        Investors also digested the four cabinet appointments in
President-elect Claudia Sheinbaum's government, including a pair
of former Mexico City officials to be her ministers for energy
and transportation. 
     The peso had depreciated significantly and is down over 7%
year-to-date following her landslide win earlier in the month.
    MSCI's index tracking Latam currencies  .MILA00000CUS 
slipped 0.4%, with Brazil's real  BRL=  edging up 0.2%, hovering
near levels last seen in January 2022 it hit in the previous
session.
    Brazil's local central bank upped its 2025 inflation
forecasts to 4%, citing stronger-than-expected activity which
led it to halt interest rate cuts earlier this month. The
regulator has a continuous inflation target of 3%.
    Separately, Brazilian central bank chief Roberto Campos Neto
said that a rate hike is not the bank's baseline scenario, and
policymakers have intentionally chosen not to provide any
guidance at this time.
    Currency of copper producers, Chile  CLP=  and Peru  PEN= 
weakened as prices of the red-metal hit their weakest in more
than two months.  MET/L 
    On the equities front, MSCI's index tracking Latin American
stocks  .MILA00000CUS  edged 0.1% higher. 
    Brazil's heavyweight Bovespa index  .BVSP  climbed 1.2%,
with Suzano  SUZB3.SA  jumping nearly 13% after the pulpmaker
said it has terminated talks to buy International Paper  IP.N .
    Petrobras  PETR4.SA  climbed 1.9% after brokerage Bank of
America upgraded the oil firm to "buy".
    Equatorial  EQTL3.SA  advanced 6.3% after the power company
was the only bidder for holding a 15% stake in water utility
Sabesp  SBSP3.SA , which is currently under a privatization
process.
    Elsewhere, Bolivia's boliviano  BOB=  edged up 0.1% in thin
trades after an attempted coup was thwarted.
    South Africa's rand  ZAR=  depreciated over 1% on reports of
major disagreements over cabinet posts.
    Kenya's shilling  KES=  slipped as civil unrest continued
even after the president bowed to pressure to withdraw a tax
hike bill. 
            
    Key Latin American stock indexes and currencies:
    
                                       Latest    Daily %
                                                  change
 MSCI Emerging Markets  .MSCIEF         1081.92     -0.39
 MSCI LatAm  .MILA00000PUS              2183.84      0.09
 Brazil Bovespa      .BVSP            124110.58       1.2
 Mexico IPC           .MXX             52197.06     -0.52
 Chile IPSA          .SPIPSA            6492.32     -0.31
 Argentina MerVal    .MERV           1627853.66      3.39
 Colombia COLCAP      .COLCAP           1377.35      0.62
                                                         
            Currencies                 Latest    Daily %
                                                  change
 Brazil real        BRBY                 5.5049      0.24
 Mexico peso        MXN=D2              18.4058     -0.44
 Chile peso       CLP=CL                  954.9     -0.44
 Colombia peso  COP=                     4170.5     -0.62
 Peru sol         PEN=PE                 3.8199     -0.04
 Argentina peso (interbank)            910.5000      0.16
  ARS=RASL                                       
 
 (Reporting by Johann M Cherian in Bengaluru; Editing by
Alistair Bell and Diane Craft)
 ((johann.mcherian@thomsonreuters.com;))