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EMERGING MARKETS-Brazil's real edges up as inflation data lifts bets for bigger rate hike
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EMERGING MARKETS-Brazil's real edges up as inflation data lifts bets for bigger rate hike
Dec 10, 2024 1:24 PM

*

Brazil's Lula stable in ICU

*

MSCI Latam FX index flat; stocks off 0.3%

*

Brazil's CPI at 0.39% in Nov

*

J.P. Morgan expects Banxico to cut by 50 bps

(Updates with afternoon trading)

By Pranav Kashyap and Johann M Cherian

Dec 10 (Reuters) - Most Latin American currencies edged

higher on Tuesday, as investors geared up for upcoming central

bank decisions in the region, with the Brazilian real

spearheading gains.

The real firmed 0.3% after data showed inflation in

the region's largest economy exceeded expectations in November,

ahead of a widely anticipated acceleration in the monetary

tightening cycle by its central bank on Wednesday.

Analysts say increased fiscal spending has been one of the

main sources of price pressures. However, Brazil's nominee for

monetary policy director at the central bank, Nilton David,

dismissed concerns that the country's fiscal situation had

deteriorated to such an extent that interest rates had become

ineffective at controlling inflation.

Still, Michael Pfister, FX analyst at Commerzbank Research

said, "(The Brazilian government is) spending way too much and

the economy is not really in need of that."

"So do you have a very strong economy, partly financed by

this high spending, which is not necessary, so the market is

very skeptical that this is sustainable and is helpful at all."

In spite of the central bank's monetary tightening, the real

has logged the steepest declines this year among major Latam

currencies and is trading near record lows.

Investors added to rate hike bets and are now pricing in a

76% chance for a 100 basis point hike in the Selic on Wednesday.

Still, yields on Brazilian bonds

eased slightly on the day.

Markets also monitored updates on President Luiz Inacio Lula

da Silva's health after an emergency surgery. He is stable and

being monitored in the intensive care unit.

More broadly, MSCI's index for Latin American currencies

was flat, while Mexico's peso edged up

0.2% against the greenback.

J.P. Morgan expects the Mexican central bank to cut interest

rates by 50 basis points at its policy meeting later in the

week, compared to a 25 bps cut earlier, after the inflation

report on Monday.

Copper producer Chile's peso slipped 0.5%, tracking

weak prices of the red metal. A central bank poll showed

analysts expect the institution to lower its benchmark interest

rate by 25 basis points to 5% at its monetary policy meeting

next week.

Fellow copper exporter Peru's sol edged up 0.2% in

thin trading, while Colombia's peso was flat.

On the equities front, an index tracking

Latam stocks eased 0.3%, after Monday's 1.3% advance.

Brazil's Bovespa added 0.7%, while Mexico's

benchmark index lost 1.3%.

Peru's main stocks index rose 1.3%. Argentina's

Merval index slid 1%. Argentina is expected to report

inflation data on Dec. 11 and a poll showed analysts expect its

consumer price index to rise 2.8% in November.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1110.65 -0.3

MSCI LatAm 2018.84 -0.29

Brazil Bovespa 128116.88 0.71

Mexico IPC 51500.55 -1.32

Chile IPSA 6720.06 0.09

Argentina Merval 2205912.6 -1.029

1

Colombia COLCAP 1382.45 0.22

Brazil real 6.0578 0.35

Mexico peso 20.178 0.23

Chile peso 974.17 -0.53

Colombia peso 4367 0.05

Peru sol 3.71 0.22

Argentina peso (interbank) 1016 0.00

Argentina peso (parallel) 1050 1.41

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