LatAm currencies decline at start of data-packed week

LatAm currencies dip: Latin American currencies broadly weakened against the US Dollar on Monday amid thin trading conditions, with investors focusing on a busy week of global economic data, including a key US jobs report.

Brazil's Real (BRL) managed to stabilise after earlier losses, remaining relatively unchanged against the Dollar. This stability followed the central bank's sale of all 14,700 swap contracts in an additional auction.

The auction came after two earlier interventions failed to prevent the Real’s depreciation, driven by a report showing Brazil’s July budget deficit exceeded 10per cent of GDP.

"The market is currently pricing in a 25 basis point rate hike in Brazil for September 18, which might help stabilise the Real. However, concerns remain that Brazil's struggle to roll over its debt at 12per cent per annum rates will keep the Real under pressure," ING analysts highlighted.

Brazil budget outlook

In its draft budget proposal for 2025, Brazil's government forecasted economic growth of 2.6per cent and inflation at 3.3per cent. GDP data expected on Tuesday is projected to show a 0.9per cent growth in the second quarter. Investors will also be watching interest rate decisions from Argentina, Chile, Poland, Malaysia, and Egypt this week.

Globally, attention will be on Friday's US jobs report as investors speculate about potential Federal Reserve rate cuts this year.

The Mexican Peso (MXN), the worst performer amongst Latin American currencies this year, fell 0.4per cent against the Dollar after a nearly 6per cent drop in August. The Peso has faced pressure from expectations of softer monetary policy and concerns about a controversial judicial reform, which is set for debate in Mexico's Lower House of Congress on Tuesday.

The Peruvian sol (PEN) declined 0.1per cent against the Dollar. Recent data showed Peru’s annual inflation slowing to 2.03per cent in August.

Chile's Peso (CLP) dropped 0.5per cent against the Dollar despite the IMACEC economic activity index rising 4.2per cent in July, surpassing the expected 2.7per cent growth.

Mixed market moves

In the stock markets, Brazil's Bovespa index fell 0.8per cent, while Colombian shares decreased by 0.6per cent. Conversely, Mexican stocks rose 0.9per cent, with Grupo Financiero Banorte and Grupo Mexico both gaining over 2per cent.

The MSCI Latin American currencies index  increased by 0.4per cent, buoyed by a nearly 1per cent rise in Colombia’s Peso (COP), while the stocks gauge remained flat. Trading activity was subdued due to the US markets being closed for a public holiday.

In Argentina, President Javier Milei vetoed a pension reform recently approved by Congress.

(With Reuters Inputs)