EMERGING MARKETS-Mexico peso tumbles, stokes bets on rate hike ahead of Fed

jueves 11 de febrero de 2016 17:53 GYT
 

(Recasts with bets on Mexican interest rate hike)
    By Michael O'Boyle
    MEXICO CITY, Feb 11 (Reuters) - A global selloff of riskier
assets drove the Mexican peso to a record low on Thursday,
spurring bets that the central bank of Latin America's No. 2
economy could hike interest rates ahead of the United States.
    Colombia's peso also hit its weakest level ever amid fears
of a global economic slowdown. At the same time, Brazilian
stocks fell sharply, hurt by concerns the government could
increase spending that would add to a spike in inflation. 
    Investors have been unwinding trades that sought to profit
from high interest rates in emerging markets due to worries
about lower crude prices and concerns weakness in world No. 2
economy China could have lasting effects on the global economy. 
    Bets that financial turmoil will not derail the U.S. Federal
Reserve's plan to increase rates later this year also weighed on
sentiment. 
    Oil prices sank to 12-year lows. Both Mexico and Colombia
are major crude producers, but Mexico depends much less on oil
exports as it ships mostly factory-made goods.
    Yields on short-term Mexican interest rate swaps 
shot higher as investors increased bets that the country's
central bank could raise interest rates at its March 18 meeting.
    Swaps suggest an 80 percent chance that Mexico could hike by
25 basis points even as worries of a global slowdown
have dampened bets the U.S. Federal Reserve will raise rates
that same month.
    Last year, Central Bank Gov. Agustin Carstens said Mexico
could even hike outside of its calendar if currency weakness
began to threaten inflation expectations, but policymakers have
not explicitly mentioned that possibility recently. 
    The Mexican peso  hit its weakest level since
a 1993 revaluation, falling as much as 2.6 percent to 19.4480
per dollar, even as the central bank sold $400 million in two
auctions. But the currency later pared losses, bouncing back to
trade about 1.4 percent weaker on the day. It has lost around 6
percent since Feb. 4, on track to mark its worst six-day losing
streak since late 2011.
    The Mexican peso has been one of the biggest victims of the
global rout as many investors use the highly liquid currency to
hedge against emerging market assets in general.
    "The problem with the peso is liquidity. Would an interest
rate differential discourage the use of the peso as a hedge? I
don't know," Siobhan Morden, an analyst at Nomura in New York. 
    "But I think it is a bit drastic to hike rates, especially
when all this uncertainty is the outcome of global growth
concerns." 
    The Mexican currency has shed more than 10 percent against
the dollar so far this year, making it the second worst
performer of the world's 36 most-traded currencies, next to the
Argentine peso that has fallen by about 11 percent, according to
Reuters data.
    Brazil's currency and stocks dropped, also
hit by worries that the government could loosen fiscal policy to
fight a deepening economic recession despite double-digit
inflation.
    
    Latin American stock indexes and currencies at 1430 GMT:
 Stock indexes                                daily %    YTD %
                                     Latest    change   change
 MSCI Emerging Markets                713.27    -2.37       -8
 MSCI LatAm                          1664.14    -2.92    -6.32
 Brazil Bovespa                     39318.30    -2.62    -9.30
 Mexico IPC                         42359.26    -0.41    -1.44
 Chile IPSA                          3650.88    -0.67    -0.80
 Chile IGPA                         17947.03    -0.63    -1.13
 Argentina MerVal                   11010.89    -2.96    -5.69
 Colombia IGBC                       8722.79     -0.1     2.05
 Venezuela IBC                      14594.52     0.08     0.04
                                                              
 Currencies                                   daily %    YTD %
                                               change   change
                                      Latest           
 Brazil real                          4.0028    -0.52    -1.39
 Mexico peso                         19.1970    -1.36   -10.25
                                                       
 Chile peso                           712.55     0.05    -0.40
 Colombia peso                       3439.49    -1.42    -7.86
 Peru sol                             3.5143    -0.23    -2.85
 Argentina peso (interbank)          14.6300    -0.89   -11.26
                                                       
 Argentina peso (parallel)             14.45    -1.38    -1.25
                                                       
                                                              
 
 (Reporting by Michael O'Boyle in Mexico City and Bruno
Federowski in Sao Paulo; Editing by Chizu Nomiyama, Diane Craft)