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EMERGING MARKETS – Brazilian Real leads Latam FX lower ahead of central bank meeting

By on September 17, 2021 0

* Comments from head of Brazil’s cenbank worry trader * Chilean markets closed for holiday Friday * Brazilian Vale declares exceptional dividend in first half (adds comments, updates prices throughout) By Susan Mathew and Shreyashi Sanyal Sept. 17 (Reuters) Latin American currencies on Friday with all eyes on the central bank policy meeting next week, as mining major Vale declared a $ 7.6 billion exceptional dividend at the first semester. The real is down about 0.7% for the week, the worst performance among regional peers. Next week, the central bank is expected to raise interest rates by 100 basis points as inflation rises. But traders are cautious after central bank chief Roberto Campos Neto said earlier this week that he would not change his plans with every indicator showing high inflationary pressures, signaling he could hint at a ceiling for the current tightening cycle. “Neto’s comments seem to indicate that there is no point in fighting inflation with more rate hikes,” said Juan Perez, a senior currency traded at Tempus Consulting. “It scares traders because the idea was to bet on a tightening, but the official’s lack of concern makes many think they are going to stop.” Political sentiment has weighed on the real as well, with investors fearing President Jair Bolsonaro’s populist policies as his popularity wanes ahead of next year’s election. Bolsonaro on Thursday signed an executive order to raise taxes on financial transactions – levied on credit, foreign exchange transactions, insurance transactions or bonds or securities – for three months to pay for the so-called protection program against the Auxílio Brasil pandemic. The Mexican peso held steady, while the Colombian peso fell 0.5% on falling oil prices. “Many Latin American countries could potentially experience a strong post-COVID rebound, but there are also risks in their financial systems,” said John Lau, head of Asian equities at SEI. “Some, like Brazil, also have higher political risks. From a valuation perspective, they are not excessive as most have fallen behind in broader emerging markets so far this year.” Markets in Chile have been closed for a holiday. In Argentina, the benchmark 2035 dollar-denominated sovereign bond fell slightly. Argentina’s center-left President Alberto Fernandez called for unity on Thursday after a rebellion of far-left ministers threatened to shatter the ruling coalition following a deadly defeat in a primary election in mid-term. Among stocks, iron ore miner Vale lost 1.3% to its lowest level in seven months, following a 7% drop in steel ingredient prices. The company on Thursday evening declared a dividend of 40.2 billion reals, or 8.11 reais ($ 1.54) per share, its biggest payout since the miner’s dam collapsed in 2019. The Bovespa stock index de Sao Paulo fell 1.8%, extending losses to a fourth consecutive session. It should underperform its Latam peers for the week, down 2.1%. Salvadoran bonds are seen after falling in last session amid fears the country will fail to meet a potential $ 1 billion loan deal with the International Monetary Fund and face negative credit implications from its use bitcoin. Main Latin American stock indexes and currencies at 19:00 GMT: Stock market indices Last daily change in% MSCI Emerging Markets 1277.56 0.06 MSCI LatAm 2334.21 -1.95 Brazil Bovespa 111 747.44 -1.8 Mexico CPI 51480 , 55 -1.36 Chile IPSA 4465.47 0.71 Argentina MerVal 78859.09 -1.102 Colombia – COLCAP 1319.85 0.27 Currency Last daily change in% Brazilian real 5.2835 -0.37 Mexican peso 20.0082 -0.39 Chilean peso 782.4 0.00 Colombian peso 3825.03 -0.27 Peruvian sol 4.1054 -0.32 Argentine peso (interbank) 98.3500 -0.03 Argentine peso (parallel) 182 2, 20 (Report by Susan Mathew and Shreyashi Sanyal in Bengaluru; edited by Dan Grebler, William Maclean)