Latam currencies subdued as US inflation data eyed; Argentina bonds, stocks slip

Updated at 4pm ET/2000 GMT

By Ankika Biswas and Lisa Pauline Mattackal

March 11 (Reuters) –Latin American currencies were largely muted against the dollar on Monday as investors awaited U.S. consumer inflation data for clues on the Federal Reserve’s rate path, while Argentina’s international dollar bonds slipped after the country launched a $65 billion bond swap.

The MSCI index for Latam currencies .MILA00000CUS was flat after hitting a near two-month high on Friday, with the dollar gaining some ground, as mixed data kept prospects of a June Fed rate cut alive.

All eyes are on U.S. CPI data on Tuesday ahead of the central bank’s March monetary policy decision next week. Emerging markets and other risky assets have been hit in 2024 as investors pull back expectations for the size and timeline for reduced borrowing costs.

“We are probably witnessing a lull in currency markets before a major spurt,” said Arthur Budaghyan, chief emerging markets strategist at BCA Research.

Budaghyan expects the U.S. dollar to continue rallying, which he said will lead to more volatility and depreciation in emerging market currencies.

Meanwhile, Argentina’s government will launch a huge voluntary debt swap of peso and some dollar-linked instruments set to mature in 2024, a bid to push back repayments amid a major economic crisis hammering the South American country.

Prices of the country’s dollar-denominated government bonds 040114HU7=1M slipped, with the 2038 note down about 2 cents. The Merval stock index .MERV dropped 4%.

Investors will also monitor a slew of other data this week including Brazil’s inflation, Argentina’s CPI and a likely interest rate decision and Mexico’s industrial output.

A Reuters poll showed Brazil’s monthly inflation rate likely accelerated to a one-year high in February. The real BRBY= was little changed against the greenback.

“More recently, price concerns have begun to re-emerge, especially after January IPCA (inflation) surprised the market to the upside,” said Bank of America analysts in a note.

Top copper producers Chile’s peso CLP= fell 0.6% as prices of the red metal fell ahead of loan data from top consumer China.

Among others, the Colombian peso COP= lost 0.3% and Mexico’s peso was flat, tracking weakness in crude oil prices.

Meanwhile, the MSCI index tracking Latam stocks .MILA00000PUS fell 0.4% to early January lows.

Petrobras PETR4.SA preferred shares fell 1.2% after plunging more than 10% on Friday as the government pushed the state-run company to reinvest cash set aside for dividends, after its board spiked an extra dividend.

Losses in Petrobras, coupled with a near 3% drop in miner Vale VALE3.SA, kept Brazil’s benchmark stock index .BVSP at around the three-month low hit on Friday.

Vale will retain Eduardo Bartolomeo as CEO through 2024, Reuters reported

Stocks in Chile .SPIPSA jumped over 1%.

Key Latin American stock indexes and currencies at 2000 GMT:

Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru
Editing by Andrew Cawthorne and Matthew Lewis