Mexican peso leads Latam losses on power reform hiccup

Mexico's peso led early losses across Latin American currencies on Thursday after the Supreme Court struck down a key component of the government's reform agenda, while most other units fell on increased buying into the dollar.

The peso dropped 0.6% to the dollar after Mexico's Supreme Court upheld an antitrust suit against a crucial part of the government's plan to reform the power sector.

The move would have given state-run electricity generators an edge in the sector, and was met with criticism from private businesses.

Other Latin American currencies fell as positive US economic data and optimism over a bumper stimulus package drove buying into the dollar, despite its position as a currency that usually weakens during risk-on trade.

"The DXY index is on track to register its fourth day of gains out of the last five... This comes even though global equities have been able to shake off some weakness overnight and return to a positive trajectory," analysts at TD Securities wrote in a note.

Chile's peso was also among the worst performers in Latam on Thursday, as concerns over a near-term drop in Chinese demand weighed on the prices of copper, the country's top export.

The peso has been subdued despite the launch of a COVID-19 vaccination program this week.

Most Latam currencies have lagged their broader emerging market peers this year as a second wave of COVID infections damaged economic activity and raised concerns over stretched fiscal spending in the region.

Colombia's peso dropped 0.5% after the central bank said that the second wave of infections - which had spurred tighter restrictions in major cities - will affect the country's economy throughout the remainder of 2021 and delay its recovery.

Most Latam stocks rose in early trade, tracking overnight gains on Wall Street.

Brazilian iron ore miner Vale SA pushed up the Bovespa index after it forecast a strong production ramp-up in 2021, as well as improved sales.