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An index of Latin American currencies

were headed for their best quarterly gain ever on Thursday as

higher commodity prices and interest rates boosted inflows but

Colombia’s peso stumbled after the central bank’s

lower-than-expected rate hike.

The MSCI’s gauge for Latin American currencies

jumped 14.3% in the quarter, with most of its

gains clocked in March.

The index performed far better than the broader emerging

markets currencies gauge, which has risen 0.6%

for the quarter.

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Heavy Western sanctions on Russia in retaliation for its

invasion of Ukraine sparked a rally in prices of oil, raw

materials and industrial metals, benefiting most resource-rich

Central and South American economies.

Latin American currencies have also been supported by

monetary policy tightening cycles that began last year from

relatively low baselines after the region’s economy was battered

by the COVID-19 pandemic.

“When you put the trifecta together – rapidly rising

interest rates, surging commodity prices and EM (Emerging

Markets) portfolio flows after a mass exodus from the Central

and Eastern European region as a result of the Ukraine war – you

end up with the perfect cocktail for Latam outperformance,” said

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Christian Lawrence, senior market strategist at Rabobank.

Brazil’s real has soared more than 17% in the

quarter, leading gains among regional peers. The currency was up

0.5% against the dollar on Thursday, tracking gains in iron ore

prices, which clocked their best quarter in five.

“Brazil has raised rates more aggressively than anyone else,

and its agri-commodities story is key, but later this year the

election cycle could correlate with volatility and weakness in

the real… So its pace of appreciation could start to slow,”

Lawrence said.

The Colombian peso fell 0.5% on Thursday after the

central bank board raised its benchmark interest rate by 100

basis points to 5%, significantly lower than expected, despite

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inflationary pressures.

Stocks in Latin America were up 0.5% on

Thursday, tracking gains of over 26% for the quarter. Mexican

stocks led gains on the day, adding more than 1%.

Russia’s rouble traded at 83.2 against the

dollar, hovering near its levels before the invasion, which

Russia calls a special operation to demilitarize Ukraine.

The currency lost nearly half its value in the immediate

aftermath of the invasion launched on Feb. 24, but tight capital

controls and central bank interventions since then have limited

losses to an 11.5% decline for the year.

Elsewhere, the Czech crown firmed 0.1% against the

euro on Thursday after the country’s central bank raised its

main interest rate to the highest level since 2001, while the

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Hungarian forint steadied at about 367 to the euro

amid uncertainty ahead of an election on Sunday.

Turkey’s lira slipped 0.2% against a stronger dollar

and was set to end its fifth straight quarter in the red.

Key Latin American stock indexes and currencies at 1935 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 1141.32 -0.69

MSCI LatAm 2690.37 0.42

Brazil Bovespa 120366.60 0.09

Mexico IPC 56579.98 1.37

Chile IPSA 4936.96 0.86

Argentina MerVal 90799.92 -0.074

Colombia COLCAP 1614.52 0.82

Currencies Latest Daily % change

Brazil real 4.7605 0.47

Mexico peso 19.8722 -0.08

Chile peso 786.9 0.25

Colombia peso 3765.82 -0.46

Peru sol 3.676 0.92

Argentina peso 111.0000 -0.10

(interbank)

(Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru;

Editing by Ken Ferris)