January 30, 2019 / 9:52 PM / 18 days ago

EMERGING MARKETS-Dovish Fed buoys Latam FX; Pemex downgrade hits Mexico peso

 (Recasts throughout, updates prices)
    Jan 30 (Reuters) - Most Latin American currencies firmed on
Wednesday, turning around session losses after the U.S. Federal
Reserve's dovish stance dented the dollar, while Mexico's peso
weakened as a Fitch downgrade of state oil firm Pemex left
questions on the sovereign debt rating of the country.
    The Fed said it would be patient in lifting borrowing costs
further this year, pointing to rising uncertainty about the U.S.
economic outlook, and kept the benchmark borrowing rate
unchanged, as expected.
    Most emerging market currencies jumped. The
MSCI index of Latin American currencies touched
a near nine-month high with Brazil's real rising 1
percent to a three-month high, while the Argentine and
Chilean pesos also climbed.  
    A hawkish Fed and a steady rise in the U.S. borrowing rate
had sucked money out of high-yielding bets in the developing
world last year, prompting currency sell-offs or crises in
Argentina, Turkey and India, among others.    
    In Mexico, the peso turned lower after rating agency
Fitch lowered the credit rating of debt-laden state oil company
Petróleos Mexicanos, or Pemex, to the lowest investment grade,
late on Tuesday.
    Pemex holds over $100 billion in financial debt - the
highest of any national oil company in Latin America.
    The peso was 0.5 percent lower at 2126 GMT. 
    "It is necessary to make the appropriate adjustments in the
oil company to avoid losing the investment grade and thereby
prevent it from being translated into a contagious effect on the
sovereign debt rating of Mexico, which would imply higher costs
for the Mexican economy," analysts at CI Banco said in a note. 
    "In the following days we will be attentive to reactions
from other rating agencies, Pemex and the government," they
said.
    Mexican President Andres Manuel Lopez Obrador on Wednesday
rejected the downgrade, arguing that Pemex is stronger than it
has been in 30 years.
    Analysts at Santander voiced concerns about oil revenues and
the impact on Mexico's budget. "Our main concern since the
budget was presented on December 15, is the fact that oil
revenues may be overestimated. ... We see risk for the 2019
budget generating additional pressure on public finances," they
said.
    Data showed that Mexico's economic growth slowed in the
fourth quarter compared to the previous quarter as
manufacturing, mining and construction shrank.
    Looking ahead, analysts at Commerzbank warn that the impact
on the current quarter of the recent fuel shortage due to
measures taken to clamp down on fuel theft, are yet to be seen. 
    Mexican stocks closed 0.16 percent lower. 
    Most other regional bourses finished higher, in line with
global stocks. Brazil stocks were boosted by a 9 percent
jump in iron ore miner Vale after it announced a plan
to shut dams and cut production after a dam burst left hundreds
feared dead. 
    In Chile, the peso closed 0.5 percent higher before
the central bank raised interest rates by 25 basis points to 3
percent.
     
    Key Latin American stock indexes and currencies at 2126 GMT:
      Stock indexes               Latest    Daily %
                                             change
 MSCI Emerging Markets             1036.63      0.67
                                            
 MSCI LatAm                        2879.93      0.82
                                            
 Brazil Bovespa                   96996.21      1.42
 Mexico IPC                       43631.36     -0.16
 Chile IPSA                        5388.34     -0.51
                                            
 Argentina MerVal                 36039.11      1.49
                                            
 Colombia IGBC                    11900.57      0.78
                                            
                                                    
         Currencies               Latest    Daily %
                                             change
 Brazil real                        3.6830      1.11
                                            
 Mexico peso                       19.1035     -0.62
                                            
 Chile peso                          663.5      0.50
                                            
 Colombia peso                      3161.7     -0.29
 Peru sol                            3.351      0.15
                                            
 Argentina peso (interbank)        37.5200      0.48
                                            
 

 (Reporting by Susan Mathew in Bengaluru; Editing by Leslie
Adler)
  
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