* Mexico inflation eases for sixth straight month
* Brazil retail sales up in H1 but losing steam
* Dollar weakens as China deflation stokes stimulus hopes
* Latam FX up 0.5%, stocks up 0.4%
Aug 9 (Reuters) – Most Latin American currencies gained
on Wednesday as hopes of more stimulus from China following weak
economic data pressured the dollar, with the Mexican peso edging
higher as traders assessed a reading showing easing domestic
inflation.
The Mexican peso rose 0.4% against the dollar after
data showed annual inflation rate in Latam’s second largest
economy slowed for the sixth consecutive month in July to 4.79%.
Analysts were divided on the implications of the inflation
data on the Bank of Mexico’s future policy stance, with the
central bank expected to keep interest rates unchanged at 11.25%
on Thursday.
Andres Abadia, Chief Latin America economist at Pantheon
Macroeconomics said easing underlying inflationary pressures
could allow the central bank to cut rates from Q4.
However, Jason Tuvey, deputy chief emerging markets
economist at Capital Economics pointed to sticky services
inflation, saying “rate cuts will be more gradual than most
anticipate”.
The policy decision will come at a time when Chile and
Brazil have started decoupling from the U.S. Federal Reserve by
cutting interest rates against a backdrop of slowing inflation.
The broader Latin American currencies index
was up 0.5% at 1910 GMT, as the dollar lost steam after
risk sentiment was bolstered by data showing China fell into
deflation, which spurred bets of more stimulus from the world’s
second-largest economy.
The stimulus hopes propped up copper prices, helping the
Chilean peso and the Peruvian sol, currencies of
top metal exporters, climb 0.2% and 0.4% respectively.{MET/L]
Meanwhile, the Colombian peso, the currency of a top
oil producer, advanced 1.6% on higher oil prices.
Also helping the peso, data released on Tuesday showed
consumer prices growth in Colombia slowed in July year-on-year
but was above market expectations, with Scotiabank analysts
saying the start of the easing cycle in the country could be
delayed if inflation fails to slow considerably.
The Brazilian real , however, edged 0.1% lower
as investors assessed data showing the country’s retail sales
ended the first half of 2023 in positive territory year-on-year,
but lost steam since January.
Elsewhere, Argentina’s peso slipped to a fresh
historic low of 600 pesos per U.S. dollar in the widely used
parallel informal market, traders said on Wednesday, ahead of a
primary vote on Sunday to pick presidential nominees for
October’s general election.
The Russian
rouble
recovered from more than a 16-month low past
98 to the dollar on Wednesday after the central bank intervened
to try and halt the Russian currency’s slide, effectively
abandoning its budget rule by stopping planned foreign exchange
purchases.
(Reporting by Amruta Khandekar and Shristi Achar A; editing by
David Evans and Diane Craft)
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