Latam FX in tight range, stocks rise as investors reassess risk

Stocks in Latin America traded higher on Wednesday, while currencies remained stuck in tight ranges against a stronger dollar, as investors reassessed exposure to riskier assets amid an ongoing coronavirus outbreak in China. MSCI’S index for Latin American stocks rose 0.4%, rising for the second straight session.

Latin American assets were faced with a hefty sell-off at the beginning of the week as the virus outbreak stoked fears of potential economic damage to the world’s second-biggest economy. Chinese President Xi Jinping said on Wednesday that preventing and containing the new coronavirus, which has killed 133 people, remained a grim and complex task. “The coronavirus continues to spread… despite all the negative virus headlines, risk appetite is roaring higher,” Edward Moya, senior market analyst at OANDA, wrote in a note. Currencies in Latin America traded in a narrow range against the dollar, which held at near two-month highs. The Chilean peso weakened slightly ahead of the Central Bank of Chile’s decision on interest rates, expected at 2100 GMT.

“We expect BCCh to stay put at today’s meeting. They will likely keep a cautious stance as the FX intervention program is still open and political uncertainty may rise ahead of the late April referendum,” said Dirk Willer, head of emerging market strategy at Citi Research, and Kenneth Lam, an emerging markets FX strategist, wrote in a note. Violent anti-government protests in Chile which erupted in October caused its peso currency to fall nearly 15%, but the central bank is still hopeful that the relative calm in recent weeks will be enough to keep the country out of recession. Other major Latin American currencies – Brazil’s real , Colombia’s peso and Mexico’s peso – barely moved.

In Brazil, central bank figures showed bank lending and the financial health of borrowers in Latin America’s largest economy ended 2019 on a positive note, as default ratios and lending spreads fell against a backdrop of strong credit growth.

Reuters

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