Latam FX firm against steady dollar; stocks fall

Latin American currencies firmed against a steady dollar on Thursday, with Chile's peso scaling an over three week high, as investors focused on signs of economic recovery even as cases of novel coronavirus infections surged.

Regional stocks fell, tracking a choppy session on Wall Street. Chile's stocks led, down 2.3%, while others lost between 0.3% and 0.7%.

Data from the United States pointed to a declining trend in weekly jobless claims, while a continued rally in Chinese stocks on recovery hopes set an upbeat tone for global markets and saw the yuan fall below 7 to the dollar.

But worries remained that surging coronavirus cases may lead to tighter containment measure which could cause a deeper recession. The global number of cases breached 12 million on Wednesday, while Brazil surpassing 1.7 million confirmed cases and 67,964 deaths.

Latam markets have rebounded sharply since March lows, but surging cases, political issues, debt restructuring deal and deteriorating economic fundamentals have weighed.

As copper prices soared to 14-month highs, exporter Chile's peso rose 1.2%.

Mexico's peso rose half a percent, firming for the seventh session in eight. The country's consumer price inflation accelerated more than expected in June, but stayed within the central bank's target rate, official data showed.

"Given the significant output contraction... and inflation hovering around the mid-point of the central bank's target, we think Banxico will further cut (interest rates by) 100 basis points to a terminal rate of 4.0%," said Citigroup strategists in a note.

They expect a 50 basis points in August, followed by two more 25 basis points cuts in September and November.

Brazil's real jumped 1.7% to 5.2552 to the dollar.

Brazil's central bank is studying recent data showing inflation is somewhat above expectations to see if there is room for a "residual" cut in interest rates, its president Roberto Campos Neto told Reuters in an interview late on Wednesday.

Campos Neto said he expected the bank's growth projections to improve as pandemic emergency economic aid measures continued to spur improved growth.

Argentine markets were closed for a local holiday. The most prominent group of funds had dismissed the government's "final" debt offer as only a good starting point on Wednesday, but analysts still believe a deal to restructure its $65 billion sovereign debt can be struck.