Latam FX mixed after Fed's bumper rate cut
Brazil to hike rates by 25 basis points on Sept 18- Poll
Colombia govt will not change proposed 2025 budget value
U.S. Fed cuts rates by 50-basis-points
Argentina's economy shrank 1.7% in Q2
Latam FX up 0.8%, stocks up 0.6%
Updated at 3:30 p.m. ET/ 1930 GMT
By Ankika Biswas and Shashwat Chauhan
Sept 18 (Reuters) -Latin American currencies were mixed on Wednesday, with the Brazilian real jumping ahead of a likely local rate hike, while global markets continued to assess the implications of the U.S. Federal Reserve opting for a interest large rate cut.
The dollar weakened globally after the Fed cut interest rates by half of a percentage point, kicking off what is expected to be a steady easing of monetary policy with a larger-than-usual reduction in borrowing costs that followed growing unease about the health of the job market.
"Against a backdrop where the strength of the economy has been difficult to gauge, the move to cut 50 basis points outof the gate from the Fed seems to be appropriate as the pace of rate cuts on the path to neutral can be adjusted accordingly," said Charlie Ripley, senior investment strategist at Allianz Investment Management.
Although Latam countries began easing rates long before the Fed, lower U.S. rates could give EM central banks more scope to ease further to support domestic growth.
Moving in the opposite direction to its peers, however, Brazil is expected to increase its rates by 25 basis points later in the day, marking the start of a short tightening campaign to quash persistent inflationary trends.
The Brazilian real BRL= rose for the fifth straight session to strengthen 0.7% against the dollar, the highest in nearly a month.
The MSCI index for Latam currencies .MILA00000CUS rose 0.8% to its highest level since Aug. 20, with Peru's sol PEN= rising 0.3% to a three-week high and the Colombian peso COP= advancing 1.1%.
Colombia's Finance Minister Ricardo Bonilla said in an interview on Tuesday that its government will not modify the value of $123.9 billion for its proposed 2025 budget.
Meanwhile, the Mexican peso MXN= dropped 0.8%, emerging as the worst-hit Latam currency on the day.
Data showed Mexican private spending fell 0.6% during the second quarter compared to the previous three-month period.
The MSCI Latam stocks index .MILA00000PUS rose 0.6% to a three-week high, even though most of the major regional stock bourses were trading lower.
Argentina's economy shrank 1.7% in the second quarter compared to the previous three months, the country's statistics agency said, extending a recession the South American nation entered early this year.
Elsewhere, Cuba's booming private businesses braced as the island's communist-run government implemented laws aimed at more tightly regulating the private sector amid a deepening economic crisis.
Markets in Chile were shut for a public holiday.
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1089.83 | -0.06 |
MSCI LatAm .MILA00000PUS | 2278.83 | 0.58 |
Brazil Bovespa .BVSP | 134296.43 | -0.49 |
Mexico IPC .MXX | 52653.72 | 0.73 |
Chile IPSA .SPIPSA | 6323.95 | -0.36 |
Argentina Merval .MERV | 1807193.85 | -0.337 |
Colombia COLCAP .COLCAP | 1307.56 | -0.44 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4442 | 0.7 |
Mexico peso MXN= | 19.236 | -0.75 |
Chile peso CLP= | 931.55 | -0.22 |
Colombia peso COP= | 4160.61 | 1.08 |
Peru sol PEN= | 3.7372 | 0.34 |
Argentina peso (interbank) ARS=RASL | 962 | -0.051975052 |
Argentina peso (parallel) ARSB= | 1240 | 2.419354839 |
Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; editing by Barbara Lewis and Alistair Bell
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