* Peru c.bank hikes interest rate to 13-year high
* MSCI Latam FX index heads for 0.4% weekly fall
* Brazil March inflation hits in 28-year high
* Chile March inflation surges to highest since 1993
(Updates prices; adds comment, details)
By Shreyashi Sanyal and Anisha Sircar
April 8 (Reuters) - Latin American currencies were set for
their first weekly decline in six on Friday as the dollar
strengthened on worries of aggressive Federal Reserve action,
while Peru's sol was supported by a sharp interest rate hike.
The MSCI's index for Latin American currencies
was set for weekly falls of 0.4%, though it rose
about 1% on the day.
Currencies in the resource-rich South and Central American
regions have been gaining for the last five weeks due to tighter
monetary policies, lack of direct exposure to the conflict in
Ukraine and a sharp rise in commodity prices.
"After starting 2022 near parity, developed markets became
increasingly riskier than emerging markets... DMs have
underperformed EMs, and DM’s total risk remains above that of
EM," said Diana Baechle, principal of applied research at
financial intelligence firm Qontigo.
But as the United States and other developed markets embark
on monetary tightening cycles, investors fear that those rising
rates could drain capital from higher-yielding and riskier
emerging markets, weighing on their currencies.
Fed minutes this week highlighted the need for more hikes
through the year, and the dollar index against a basket of other
hard currencies rose to 100 for the first time in nearly
two years.
The sol gained 0.2% after Peru's central bank raised
its benchmark interest rate 50 basis points to 4.5% on Thursday.
It is the highest rate since 2009, as authorities battle
stubborn inflation that has sparked angry protests and rattled
center-left President Pedro Castillo's administration.
The country's economy is still being weighed down by
protests hitting copper mines, a central bank official said
Friday.
The Brazilian real gained 1% against the
dollar. Data showed inflation in March was the highest in 28
years as higher fuel prices weighed on the economy.
Chile's peso slipped 1.1%. Data showed consumer
prices rocketed 1.9% in March, the highest monthly rise in
almost thirty years.
Mexico had posted red-hot inflation figures in Thursday,
with its peso up 0.5% on the day.
These reports suggested that even as markets rallied on the
recent surge in commodity prices, it also drastically increased
inflationary pressures in such economies.
"The larger-than-expected rises in inflation in both Chile
and Brazil support our view that their central banks will raise
interest rates by more than most currently expect over the
coming months," William Jackson, chief emerging markets
economist at Capital Economics said.
As central banks in Latam pursue their rate-hiking cycles,
fears linger around that policy's impact on real economic
growth.
Key Latin American stock indexes and currencies at 1925 GMT:
Stock indexes Latest Daily % change
MSCI Emerging Markets 1128.47 0.21
MSCI LatAm 2648.58 0.29
Brazil Bovespa 118223.45 -0.54
Mexico IPC 54757.98 -0.95
Chile IPSA 4960.74 -0.09
Argentina MerVal 92168.30 0.666
Colombia COLCAP 1630.48 0.1 Currencies Latest Daily % change
Brazil real 4.7029 0.78
Mexico peso 20.0348 0.43
Chile peso 816.4 -1.46
Colombia peso 3751.82 0.33
Peru sol 3.71 -0.38
Argentina peso 112.1500 -0.14
(interbank)
Argentina peso 193.5 1.29
(parallel)
(Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru;
editing by Alistair Bell)
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