(Updates prices, adds comment) By Susan Mathew and Sruthi Shankar Jan 19 (Reuters) – The Mexican peso on Thursday eased further from 2020 highs hit earlier in the week and other Latin American currencies slipped, weighed by growing fears of a recession and hawkish comments from central bankers. Mexico’s peso, among the strong performers of 2022, lost another 0.6% to 18.98 per dollar after dropping 1.2% and retreating from three-year highs in the previous session. “The peso is still very much near its strongest level of 2020 at 18.52 on the back of solid gains so far this year that brought the currency into ‘overbought’ territory,” said Juan Manuel Herrera, senior economist at Scotiabank. “Technical considerations may cool the MXN’s ascent while we also remain attentive to messaging from Banxico on how soon they will stop increasing rates.” Another outperformer of 2022, the Brazilian real slipped 0.1%, moving further away from two-month highs hit on Wednesday. Spooking investors on Wednesday, President Luiz Inácio Lula da Silva told TV network GloboNews that the formal independence of the central bank, established by law in 2021, was “nonsense” and that the current inflation target hinders economic growth. Institutional Relations Minister Alexandre Padilha, seeking to appease markets, said on Thursday the government does not intend to make changes to the country’s central bank. The broader emerging market (EM) currencies index shed 0.2% as falling U.S. weekly jobless claims provided evidence of a tight labor market, and followed hawkish commentary from Federal Reserve policymakers on Wednesday. This comes after declining U.S. retail sales and manufacturing data on Wednesday had renewed recession worries. A weak economic growth outlook and higher borrowing costs cloud the outlook for EM sovereigns through the year, ratings agency Fitch said in a report. Geographically, Emerging Europe, Asia and Sub-Saharan Africa were seen as regions with “deteriorating” outlook, while the Middle East and North Africa, alongside Latin America, were “neutral.” Chile’s peso dipped 0.3% against the dollar after ratings agency Fitch warned that prolonged political uncertainty was weighing on the country’s economic prospects. Argentina’s central bank said on Wednesday it would raise the country’s one-day reverse repo rate by 200 basis points to 72%, with a similar size hike on the active repo rate. The move followed news that Argentina will buy back overseas bonds equivalent to over $1 billion to improve its debt profile. “This shows the Economy Ministry is concerned about the recent rise in the parallel exchange rates,” Citi analysts said in a note. “By using the overnight rate, the Central Bank has a direct influence on the returns of money market funds and other short-term assets to discourage portfolio dollarization at the margin.” Among stocks, troubled Brazilian retailer Americanas tumbled 33.9% after it filed for bankruptcy protection, days after uncovering nearly $4 billion in accounting inconsistencies and amid a legal feud with creditors. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1029.52 -0.05 MSCI LatAm 2282.17 -0.9 Brazil Bovespa 112909.03 0.61 Mexico IPC 53435.42 0.41 Chile IPSA 5208.65 -0.4 Argentina MerVal 231685.04 -1.567 Colombia COLCAP 1329.94 -0.59 Currencies Latest Daily % change Brazil real 5.1653 -0.11 Mexico peso 18.9853 -0.58 Chile peso 825 -0.25 Colombia peso 4664.48 0.54 Peru sol 3.8528 -0.67 Argentina peso (interbank) 183.1000 -0.16 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru; Editing by Alex Richardson and Diane Craft)
