Peru’s sol cheers rate hike as Latam assets join global rally

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Most Latin American currencies and

stocks firmed on Friday in line with global markets on signs

that the United States and China are attempting to repair frayed

ties, while Peru’s sol hit an over two-week high following an

interest rate rise overnight.

The sol rose 0.5% after a 50 basis points hike by the

central bank on Thursday to 1%. This is the second rate hike in

a row as the country battles a post pandemic pick-up in

inflation.

The bank said it expects inflation to return within target

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in the next 12 months. It said that Thursday’s hike does not

necessarily imply “a cycle of successive rate hikes,” but it

also took off from its statement the need to maintain an

expansionary monetary policy stance.

“We read these two statements as hinting the intention to

move the policy rate towards neutrality but not necessarily

through a front-loaded continuous rate normalization cycle,”

Goldman Sachs analysts wrote in a note.

“Additional near-term rate hikes are likely given the

deterioration of the current and prospective inflation and

exchange rate outlook.”

Several emerging market central banks have embarked on a

hiking cycle to stave off inflation, with Russia’s 25bps hike on

Friday being the latest.

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Mexico’s peso extended gains to a third straight

session, up 0.4%, bolstered by positive industrial production

data, while Brazil’s real extended previous session’s

strong gains as retail sales rose in July.

News of a phone call between the presidents of the United

States and China was welcomed after the severely strained ties

between the two nations under former U.S. President Donald Trump

had led to a trade war that slowed global growth and hammered

markets.

The Brazilian real was set to end a very volatile week about

0.3% lower. Overnight it jumped 2.4% after President Jair

Bolsonaro stepped back from his feud with the Supreme Court. A

trucker’s strike, which has disrupted routes for export items,

will end on Sunday, he said.

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Among stocks, Brazilian steelmaker CSN rose

almost 3% after agreeing to by world’s largest cement maker

Holcim’s Brazil business for $1 billion.

Chile’s LATAM Airlines slumped 8%. Latin America’s

largest carrier said it has received several offers to fund its

exit from Chapter 11 bankruptcy. Each of the offers are worth

more than $5 billion, less than the company’s claims estimates

of between $8 billion and $9.9 billion.

A source said LATAM has no intention of pursuing a sale of

any of its business units.

Key Latin American stock indexes and currencies at xx GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1313.20 1.02

MSCI LatAm 2423.36 1.34

Brazil Bovespa 115899.08 0.47

Mexico IPC 51608.02 0.41

Chile IPSA 4468.04 1.38

Argentina MerVal 0.00 0

Colombia COLCAP 1322.09 -0.05

Currencies Latest Daily %

change

Brazil real 5.2090 0.34

Mexico peso 19.8542 0.32

Chile peso 790.7 0.38

Colombia peso 3837.48 0.10

Peru sol 4.0846 0.15

Argentina peso 98.0800 -0.02

(interbank)

(Reporting by Susan Mathew in Bengaluru; Editing by Angus

MacSwan)

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