By Susan Mathew and Bansari Mayur Kamdar
March 10 (Reuters) – Most Latin American currencies fell against a firming dollar on Thursday as red-hot U.S. inflation data raised bets for an interest rate hike by the Federal Reserve, and risk appetite spurred by talks between Russia and Ukraine, faded.
Brazil’s real BRBY, BRL=, Colombia’s peso COP= and the Mexican peso MXN= fell between 0.1% and 2%, while higher copper prices lifted currencies of top producers Chile CLP= and Peru PEN=.
Data on Thursday showed U.S. consumer prices surged in February, sending the dollar USD= up 0.5% as it cemented expectations for a March rate hike.
Earlier in the day, the European Central Bank surprised with a hawkish tone, signaling a tapering of the pandemic-era stimulus that had helped flows into riskier assets.
Commodity-rich Latam has performed better among emerging market peers as Russia’s invasion of Ukraine has reduced appetite for risk, but analysts point to the consequent surge in inflation and some idiosyncratic factors that could weigh.
“Brazilian and Colombian elections are going to create increased political risk and we should see some weakness on the back of that,” said Christian Lawrence, senior market strategist at Rabobank.
At the moment “a lot of Latam currencies are actually benefiting from a flow perspective, with flows leaving Central and Eastern Europe and some of those going into Latam,” Lawrence said.
Feeding into inflation fears, Brazil’s state-run oil company Petrobras PETR4.SA said it will raise fuel prices at the refinery gate starting Friday. Shares were up over 3% as the news calmed investor concerns about the growing discount that it has offered domestic consumers.
Elsewhere, Russia’s rouble RUBUTSTN=MCX firmed, ending at 118 to the dollar in Moscow, while it strengthened to 126 in the offshore market. It has lost about 45% of its value since Moscow sent troops into Ukraine two weeks ago.
The Bank for International Settlements suspended Russia as a result of Western sanctions imposed on the country.
Ukrainian Foreign Minister Dmytro Kuleba tempered expectations for a ceasefire agreement or other results from a meeting with Russian counterpart Sergei Lavrov.
“Overall price action remains very volatile… every sign that might seem like progress between Ukraine and Russia will cause some relief in markets,” said Wilson Ferrarezi, an economist at TS Lombard.
Key Latin American stock indexes and currencies at 1926 GMT:
Stock indexes
Latest
Daily % change
MSCI Emerging Markets .MSCIEF
1103.28
1.16
MSCI LatAm .MILA00000PUS
2430.00
-0.62
Brazil Bovespa .BVSP
113349.09
-0.48
Mexico IPC .MXX
53407.83
-0.93
Chile IPSA .SPIPSA
4609.26
-1.01
Argentina MerVal .MERV
89156.22
2.212
Colombia COLCAP .COLCAP
1546.15
0.56
Currencies
Latest
Daily % change
Brazil real BRBY
5.0174
-0.11
Mexico peso MXN=D2
20.9202
-0.13
Chile peso CLP=CL
802.9
0.12
Colombia peso COP=
3818
-2.07
Peru sol PEN=PE
3.709
0.43
Argentina peso (interbank) ARS=RASL
108.7700
-0.06
(Reporting by Anisha Sircar in Bengaluru, Editing by William Maclean and Barbara Lewis)
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