September 16, 2016 / 4:46 PM / 2 years ago

EMERGING MARKETS-Mexico peso hits record low on U.S. CPI data; Brazil real rises

By Bruno Federowski
    SAO PAULO, Sept 16 (Reuters) - Most Latin American
currencies slumped on Friday after U.S. inflation data offered
additional support to expectations of a Federal Reserve rate
hike this year, with the Mexican peso hitting a fresh record low
against the dollar.
    But the Brazilian real strengthened after central bank chief
Ilan Goldfajn told Reuters that financial turbulence stemming
from U.S. policy tightening could deter the bank from quickly
reducing its stock of currency swaps. 
    U.S. consumer prices rose faster than expected in August as
higher housing and healthcare costs more than offset a decline
in gasoline prices. 
    Uncertainty over U.S. monetary policy has been a major
source of volatility ahead of next week's Fed policy meeting.
Higher-yielding emerging market assets have benefited from years
of abundant capital inflows that now seem to be coming to an
    Mexico's peso  hit a new historic low at
19.777 per U.S. dollar with most financial markets in the
country closed for a local holiday.
    The peso has weakened more than 4 percent so far this month,
hurt by concerns U.S. Republican presidential candidate Donald
Trump could win the Nov. 8 election after polls showed him
    The Brazilian real hovered around 3.30 per greenback
as traders bet the central bank will stick to a more cautious
intervention policy amid global volatility.
    The bank this week reduced its daily auctions of reverse
currency swaps, which function like future dollar purchases from
    "The real's tumble (over the past week) to 3.30 per U.S.
dollar was quick and the central bank's decision to reduce swap
auctions showed discomfort," analysts with Lerosa Investimentos
brokerage wrote in a client note.
    Goldfajn also said the bank cannot rule out any currency
intervention tools, even the use of international reserves, to
reduce excess volatility in the future.

    Key Latin American stock indexes and currencies at 1625 GMT:
 Stock indexes                    Latest        Daily  YTD pct
                                                  pct   change
 MSCI Emerging Markets                885.43     -0.4    11.94
 MSCI LatAm                         2,312.50    -0.79    27.39
 Brazil Bovespa                    57,371.63    -0.93    32.35
 Mexico IPC                        45,922.91     0.34     6.85
 Chile IPSA                         4,049.34    -0.43    10.03
 Chile IGPA                        20,159.25    -0.37    11.06
 Argentina MerVal                  15,713.46    -0.87    34.59
 Colombia IGBC                     10,031.84    -0.79    17.37
 Venezuela IBC                     11,925.21    -0.11   -18.25
 Currencies                           Latest    Daily  YTD pct
                                                  pct   change
 Brazil real                          3.2910     0.29    19.93
 Mexico peso                         19.6585    -1.50   -12.35
 Chile peso                            676.5    -0.74     4.91
 Colombia peso                      2,950.39    -0.71     7.42
 Peru sol                              3.394    -0.29     0.59
 Argentina peso (interbank)          15.0900    -0.13   -13.97
 Argentina peso (parallel)             15.42     0.00    -7.46

 (Reporting by Bruno Federowski, editing by G Crosse)
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