Article content

Brazil’s real slid on Tuesday,

underperforming the other commodity-linked Latin American

Article content

currencies, amid fiscal policy uncertainty, while Hungary’s

forint firmed after the central bank said monetary policy would

stay restrictive for a “prolonged period.”

Brazil’s real dipped 0.9% as investors grew impatient

with the uncertainty surrounding President-elect Luiz Inacio

Lula da Silva’s Cabinet picks and policy plan.

Members of his transition team have voiced contrasting views

Article content

on 2023 budget talks. Brazil’s vice president-elect, Geraldo

Alckmin, said that a constitutional amendment to exempt social

spending from the budget cap will include a proposal to revise

the country’s fiscal framework in 2023.

Separately, Brazilian President Jair Bolsonaro challenged

his electoral defeat last month to leftist rival Lula, according

to a complaint filed with the country’s federal electoral court

(TSE).

Mexico’s peso rose 0.6%, while the currencies of

Chile and Colombia gained 1.7% and 0.9%,

respectively, against a weaker dollar as prices of their

top exports, oil and copper, rebounded after a rout in the

previous session.

Hungary’s forint rose 0.6% against the euro,

outperforming its Central-Eastern European peers, after the

Article content

central bank’s decision, which was in line with expectations, to

keep the base rate on hold at 13% following an emergency hike

last month.

The central bank expects inflation to rise further in the

coming months and growth to slow more this quarter.

In Nigeria, the central bank raised its benchmark lending

rate to 16.50% from 15.50% as it strives to rein in inflation.

The move follows a 150 basis-point increase in September. The

naira currency was flat against the dollar.

While emerging market central banks had started tightening

their monetary policy far ahead of developed peers such as the

U.S. Federal Reserve and the European Central Bank, inflation

has consistently exceeded their target expectation.

“We expect realized inflation to decline only gradually,

Article content

returning close to target in many markets in 2024. Soberingly,

the end of the hiking cycles will not mean the start of easing

cycles during 2023 for many EM central banks,” Societe Generale

strategists said in a note.

“With increasingly restrictive financial conditions working

to rein in inflation, growth headwinds holding back currency

performance may ease as policy rate hikes halt … EM FX total

returns in 2023 are likely to be robust across most markets,

with CEEMEA, LATAM, and Frontier FX performance boosted by high

carry.”

Meanwhile, a Reuters poll showed Mexico’s annual headline

inflation is likely to have eased in early November but to have

stayed well above official targets.

Key Latin American stock indexes and currencies by 2006 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 927.06 -0.43

MSCI LatAm 2146.77 -1.58

Brazil Bovespa 107961.66 -1.63

Mexico IPC 51855.69 0.55

Chile IPSA 5294.78 -0.34

Argentina MerVal 157681.51 0.272

Colombia COLCAP 1247.99 1.34

Currencies Latest Daily % change

Brazil real 5.3686 0.19

Mexico peso 19.4277 0.57

Chile peso 926 1.63

Colombia peso 4904 0.88

Peru sol 3.8335 -0.13

Argentina peso (interbank) 164.4900 -0.80

Argentina peso (parallel) 304 0.66

(Reporting by Susan Mathew and Devik Jain in Bengaluru

Editing by Mark Potter and Matthew Lewis)