Latam FX weaken as dollar firms, Chile's peso at one-month low

Chile's peso hit an one-month low and led declines among Latin American currencies on Monday, while most regional stocks rose amid hopes of more global stimulus and upbeat China data.

Chile's peso slid 1.9% after posting its worst week since 2011 on Friday.

"With most of the pension fund related inflows behind us, we see the Chilean peso continuing its mean reversion back to fair value, underperforming peers such as the Colombian and the Mexican pesos in the short run," said FX strategists at JP Morgan.

Late last month, Chilean President Sebastian Pinera signed into law a plan to allow citizens to withdraw 10% of their pensions savings in an attempt to help millions of its citizens who lost jobs due to the coronavirus pandemic. More than 3 million Chileans withdrew a portion of their pensions when the law went into effect shortly after.

The move had seen the currency hit its highest level since early January and post its best monthly gain ever in July.

MSCI's index of Latam currencies fell to its lowest in four weeks on Monday as investor focus on the US fiscal aid package saw the dollar gain against most rivals.

Brazil's real gave up early gains to trade 0.9% lower, continuing the recent weakness following the central bank's move to cut its benchmark lending rate to an all-time low last week.

Worries around Sino-US ties also persisted, but data on Monday showing signs of improvement in China's factory activity helped bring focus back to hopes of a post-pandemic economic rebound. China is one of the biggest importers of agricultural commodities and metals from Latam.

Market participants are hoping for a pickup in Latam currencies in the second half of the year on higher commodity prices.

Mexico's peso fell half a percent as investors braced for a likely interest rate cut by the central bank on Wednesday to the lowest level in four years.

The Argentine peso edged lower. A central bank survey on Friday predicted a 12.5% contraction ??in 2020.

Argentina is set to start talks with the International Monetary Fund in the coming weeks aimed at a new program to replace a defunct $57 billion standby lending deal inked in 2018.

Among stocks, Mexico's Ipc index led gains, up 0.7%. It had hit seven-week highs in the session before paring some gains.