Most Latin American currencies on track for weekly drops on commodity weakness

Updated at 3:40 p.m. ET/ 1940 GMT

By Johann M Cherian and Shashwat Chauhan

July 26 (Reuters) – Most currencies in Latin America were set for weekly losses on Friday on the back of price drops in commodities such as copper and iron ore, while global risk markets remained stable after data showed an improving U.S. inflation picture.

MSCI’s index tracking currencies in the resource-rich region .MILA00000CUS slipped 0.3%, and was poised for a weekly drop of 1.9%, its steepest decline in more than seven weeks.

Brazil’s real BRL= dipped 0.3%, but was set to end the week lower by over 1%, tracking a weekly decline in iron ore prices. [IRNORE/]

A Reuters poll showed economists expect the Brazilian central bankto leave interestrates unchanged fora second time in a row next week as a wave of currency instability deepens policymaker concerns over the trajectory of consumer prices.

Mexico’s peso MXN= held steady at 18.45 per dollar, though it was headedfor a second consecutiveweeklydecline.

Chile’s peso CLP= was flat at 949.39 per dollar. The country’s centralbank is expected to hold its benchmark interest rate at 5.75% at its monetary policy meeting next week, a poll showed.

Bucking the trend, Colombia’s peso COP= rose 0.3%, while Peru’s sol PEN= also strengthened 0.8%.

Meanwhile, the dollar =USD was subdued after data showed moderate increases in the personal consumption expenditures price index in June, underscoring animproving inflation environment that could position the Federal Reserve to begin cutting interest rates in September.

“The Fed and the market are still getting what they need to keep the Fed on a path to a first cut to their policy rate in September and a ‘soft landing’ being the most likely economic outcome,” said Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors, referring to a scenario in which inflation is tamed without triggering a painful recession or sharp rise in unemployment.

An easing of U.S. interest rates is generally viewed as a positive for emerging markets, where interest rates are broadly higher, increasing the appeal for “carry trades.”

On the equities front, Brazil’s Bovespa index .BVSP added 1.3%, with Vale VALE3.SA rising 1.7% after the mining giant said its second-quarter net profit was triple that of theyear-earlier period, beating analyst estimates, as sales jumped.

Usiminas USIM5.SA tanked 23.2% after the steelmaker reported a loss in the second quarter and was operationally weaker than expected.

A broader index tracking regional bourses .MILA00000PUS was up 0.4%, though setfor its biggest weekly decline of about 3%.

Indexes in Mexico .MXX and Colombia .COLCAP fell 0.3% and 0.4%, respectively.

Attention this weekend willbe on presidential elections in oil-producing Venezuela.

HIGHLIGHTS

** Venezuela’s bondholders hope pre-election recruitment drive will pay off

** Chile’s Codelco says output falls 8% in first half of 2024

Key Latin American stock indexes and currencies:

Reporting by Johann M Cherian and Shashwat Chauhan in Bengaluru; Editing by Emelia Sithole-Matarise and Paul Simao