The Colombian peso led the decline in Latin American currencies as speculation increased about future monetary policy easing, while the Brazilian real took a hit as traders stuck to their bets on a rate cut this week.
The Colombian peso fell 2.2% to a two-week low as traders continued to gauge the prospect of a rate cut this year after the central bank kept its benchmark rate steady on Monday for the second time in a row.
Colombia’s President, Gustavo Petro, expects the central bank to start cutting interest rates in September to boost economic activity that is showing signs of slowing.
Meanwhile, the country’s home secretary said the government was ready to accept changes to the Jobs, Pensions, and Health Bill but would try to maintain the spirit of the bills while achieving as much agreement as possible.
The real fell 1.4 ter. Brazil’s industrial production surprised economists with a slight increase in June, but the positive results are unlikely to prevent a rate cut in the largest economy in Latin America this weekend.
“We expect the Selic rate to fall 25 basis points to 13.50%,” said William Jackson, chief emerging markets economist at Capital Economics, referring to the central bank’s policy rate.
Brazilian President Luiz Inacio Lula da Silva expressed confidence in the economy, adding that he expected “solid” growth and celebrating some recent positive data on consumer confidence.
Also affected by a stronger US dollar and weaker commodity prices, the MSCI index of major Latin American currencies started August weaker, falling 0.8%.
The Chilean peso and Peruvian sol fell 0.2% and 0.9%, respectively, owing to lower copper prices. Both countries are the world’s leading metal producers.
Data showed that Chile’s IMACEC economic activity index, a close indicator of gross domestic product (GDP), shrank 1% in June from a year earlier.
The Argentine peso fell to a record low of $560 per dollar on the parallel unofficial market, with the gap widening to 102.8 percent of the official exchange rate.
