BRASILIA: Aug 22 (Reuters) – Most Latin American currencies and stocks jumped on Friday after US Federal Reserve Chair Jerome Powell pointed to a September interest rate cut at the Federal Reserve’s Jackson Hole symposium.
Powell stopped short of committing to cutting rates in remarks that walked a narrow line acknowledging growing risks to the job market while also saying risks of higher inflation remain. Traders boosted bets on a September cut to a nearly 90 percent versus 75 percent before Powell’s remarks.
The dollar index fell 0.7 percent, uplifting most EM currencies. MSCI’s gauge tracking Latin American currencies advanced 0.9 percent.
“This is just what investors were hoping to hear, given the recent slowdown in the labor market… while there is one more employment report before the September meeting, it’s clear the Fed has enough data under its belt to justify a September cut,” said David Laut, chief investment officer at Abound Financial.
Mexico’s peso gained 0.6 percent. Data showed headline inflation undershot market expectations, supporting the case for further interest rate cuts, further boosting the currency.
Currencies in Chile and Colombia also gained 0.7 percent and 0.9 percent respectively, with higher copper prices amplifying gains for the former
Brazil’s real was up 0.7 percent, while Argentina’s peso was the only currency that weakened against the greenback, down 0.8 percent.
Dollar bonds in Argentina were lower, with the one maturing in 2030 down about 1 cent on the dollar after the country’s Senate approved spending increases.
However, some concerns lingered over the independence of the Fed after US President Donald Trump said he would fire Fed Governor Lisa Cook if she did not resign, after his demand for her resignation over mortgages.
MSCI’s regional equities measure jumped 1.9 percent, set for their best day in over three months. Heavyweight Brazilian ones up 0.8 percent, while ones in Chile and Colombia gained 0.6 percent and 0.7 percent respectively.
