Latam currencies set for weekly loss as Brazil in focus

Updated at 1443 GMT

By Johann M Cherian

July 19 (Reuters) –Most currencies in Latin America were poised for weekly losses on Friday, as a global tech outage, lower commodity prices and volatility around U.S. elections curbed risk taking and investors assessed Brazil’s decision to freeze some spending.

MSCI’s index tracking Latam currencies .MILA00000CUS was flat against the U.S. dollar, but was set to end the week lower by 1.2%, its biggest weekly drop in over a month.

Copper producer Chile’s peso CLP= dipped 0.2%, and was on track for its biggest weekly drop in four months of nearly 4%.

Much of the losses were driven by copper prices that fell to a three-month low on disquiet about a weak Chinese economy and the lack of stimulus announcements. MET/L

Mexico’s peso MXN= edged up 0.4% after two straight days of losses. An initial estimate showed the region’s second-largest economy likely grew by 0.9% in June compared with the same month a year earlier.

Against the backdrop of sticky inflation, expectations of slowing economic activity and uncertainty about relations between the oil exporter and the U.S. in the event of a second term for U.S. presidential candidate Donald Trump, attention is on the local central bank’s monetary policy path.

“Banxico’s growing concerns over the slowdown in economic activity are likely to prove decisive at upcoming policy meetings. So, if a rate cut should fail to materialise in August, we think it would remain on the table for September,” said Wilson Ferrarezi, an economist at TS Lombard.

Brazil’s real BRL= inched 0.2% lower, while the yield on sovereign bonds BR2YT=RR, BR5YT=RR, BR10YT=RR rose between 15 and 24 basis points (bps).

On Thursday, Finance Minister Fernando Haddad announced plans to freeze 15 billion reais ($2.70 billion) from the 2024 budget as the government struggles to meet this year’s fiscal target.

The currency is among the biggest losers in the region, down nearly 13% year-to-date, as traders feared excessive government spending in the region’s largest economy.

An index tracking regional equity indexes .MILA00000PUS was on track for a weekly loss of 2.9%, its biggest weekly drop in over a month.

Brazilian carrier Azul AZUL4.SA, lender Bradesco BBDC4.SA and Chile’s LATAM Airlines LTM.SN were among the businesses affected by a global tech outage.

Azul added 3%, while Bradesco was flat and LATAM lost 0.4%.

Brazil’s Bovespa .BVSP rose 0.3%, with Embraer EMBR3.SA jumping 5% after the planemaker said its second quarter deliveries surged 88% from a year ago.

Argentina’s MerVal index .MERV rose 2.1%, while yields on dollar bonds 040114HX1=1M, 040114HV5=1M, 040114HT0=1M rose between 10 and 22 basis points (BPS).

BCRA central bank said it had agreed with lenders to terminate liquidity options contracts worth approximately 13.17 trillion pesos ($14.2 billion), saying this would help to reduce uncertainty concerning monetary policy.

Key Latin American stock indexes and currencies:

Reporting by Johann M Cherian in Bengaluru; editing by Barbara Lewis