Latin American currencies ended on a high note on Friday against a weaker dollar after robust U.S. jobs data painted a brighter picture for global growth and gave the U.S. central bank more reason to stay on its dovish path.
MSCI’s index of Latam currencies rose 0.6% as regional currencies made impressive gains as the dollar slid.
“The employment report supports the current position of the U.S. Federal Reserve to be patient about future steps in relation to interest rate movements,” CI Banco analysts wrote in a note to clients.
Last year, a steady rise in the official rate of return for holding U.S. dollars had sucked money out of high-yielding bets in the developing world.
Brazil’s real rose 0.7% on the day, but extended weekly losses to a fourth straight week. The focus next week will return to pension reforms as a bill to overhaul the pension system comes under review of a special committee, after clearing a congressional hurdle last week.
Aided also by a rebound in prices for copper – Chile’s main export – its currency posted its best day in four weeks. On the week, however, the Chilean Peso extended losses to a third straight week.
A poll showed that currencies of Brazil, Mexico and Argentina are headed for rocky months ahead as political uncertainty and deteriorating economic indicators plague Latin America’s top three economies.
Among stocks, Brazil’s Bovespa stock index climbed half a percent, in line with world stocks. But for the week it slipped for the first time in three weeks. Retailer Via Varejo was the top gainer, up 9%, after saying its board is proposing to shareholders the removal of a clause in the company bylaws demanding a tender offer to all shareholders if an investor buys a stake larger than 20%.
Meanwhile, Argentina’s MerVal stock index zoomed 5.2%, clocking its biggest percentage gain in six months and taking weekly gains to 8%. Measures announced by the government and the central banks to support the currency helped Argentina’s peso rise 3.7% this week, recovering part of last week’s 9% slump.