EMERGING MARKETS-Argentine peso slides as central bank allows more volatility; Brazil’s real firms

By Susan Mathew

Oct 2 (Reuters)Argentina’s peso dropped on Friday after the central bank said it would allow a managed float of the currency, while most other Latin American units fell as global sentiment took a hit after U.S. President Donald Trump tested positive for COVID-19.

The Argentine peso ARS=RASL led losses with the bank saying it would abandon its current “uniform daily devaluations and introduce greater volatility” as the gap between the official exchange rate and the rate quoted in the country’s informal currency markets widened close to 93%.

The bank said it would offer trades at 76.95 pesos per dollar at Friday’s open, around 0.91% weaker than the close on Thursday. It also increased the important overnight repo rate to 24%, from the current 19%.

“Even if the number of measures announced is not low, we do not expect them to change the current dynamics. The measures are likely to be seen as insufficient and hence run the risk of being counterproductive,” Citigroup Latam FX strategists said a note.

“Even if increasing the repo rate is a move in the right direction, the size of the increase is probably too small given the size of the imbalance currently observed in the official FX market,” they said, adding that raising the rate of volatility of the official FX rate will not encourage a higher supply of dollars but rather have the opposite effect.

The safe-haven dollar gained traction after Trump and wife, Melania, contracted the disease just four weeks before U.S. elections. FRX/

Mexico’s peso MXN= fell as much as 1% before trading steady, while the currencies of Colombia COP= and Chile CLP= declined 0.4% and 0.6%, respectively.

Brazil’s real BRBY, meanwhile, rose 0.6% in volatile trade with data showing industrial output in the country rose 3.2% in August, continuing a pick-up after shuddering to a standstill due to coronavirus-linked lockdowns.

A Reuters poll showed that Latam currencies are set to remain weighed down this quarter by continuing fears about Brazil’s public finances and Mexico’s close link to U.S. politics before the November presidential vote.

Among regional stocks, most fell, in line with global stocks. Sao Paulo shares .BVSP, however, rose as a banks rally outweighed a slide in shares of oil major Petrobras PETR4.SA, PETR3.SA, which tracked a slump in crude prices.

Key Latin American stock indexes and currencies at 1359 GMT:

Stock indexes


Daily % change

MSCI Emerging Markets .MSCIEF






Brazil Bovespa .BVSP



Mexico IPC .MXX






Argentina MerVal .MERV






Daily % change

Brazil real BRBY



Mexico peso MXN=D2



Chile peso CLP=CL



Colombia peso COP=



Peru sol PEN=PE



Argentina peso (interbank) ARS=RASL



(Reporting by Susan Mathew in Bengaluru;)

(([email protected]; +91-80-6287-2704;))

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