By Bruno Federowski
SAO PAULO, Aug 23 (Reuters) - Mexico’s peso deepened losses on Tuesday after Standard & Poor’s cut the country’s sovereign credit outlook to negative, while other Latin American currencies weakened following strong U.S. housing data ahead of Fed Chair Janet Yellen’s speech Friday.
Mexico’s peso weakened for the fifth straight session to its worst level in two weeks after the move by S&P, which said a downgrade could happen in the next two years if the government’s debt or interest burden deteriorated.
On Monday, data showed Mexico’s economy shrank in the second quarter for the first time in three years on the biggest slump in industrial output since 2009, prompting the government to cut its 2016 growth outlook.
The currency closed down 1.46 percent at 18.5675 per dollar, while Mexico’s IPC stock index fell 1.3 percent to close at 47,666.02 points, its biggest daily fall in two months.
Currencies across the region lost ground after data showed new U.S. single-family home sales unexpectedly reached a nearly nine-year high in July, offering additional support to growing expectations of a U.S. rate hike this year.
Traders have been anxiously awaiting Yellen’s remarks at the annual central bankers meeting in Jackson Hole, Wyoming, for clues over the timing of a rate increase.
Recent comments by Fed policymakers have generally taken a hawkish tone, but minutes from its last policy meeting suggested officials remained divided over the issue.
The Brazilian real fell 1 percent against the dollar to 3.2335 per dollar, while the Colombian peso fell 1.11 percent to close at 2.923 per greenback.
Traders also awaited suspended President Dilma Rousseff’s trial at the Senate, set to begin on Thursday. Lawmakers are widely expected to confirm her impeachment, but many traders expect that to be a trigger for further inflows into Brazil. (Reporting by Bruno Federowski; Editing by Cynthia Osterman and Jacqueline Wong)