Latam FX rise as US inflation data dents dollar

Most Latin American currencies edged up in volatile trading on Tuesday after the dollar weakened on the back of US inflation data that suggested the Federal Reserve's accommodative policy stance would remain intact.

Brazil's real rose 0.2% while Mexico's peso added 0.3%. Higher copper prices bolstered top producer Chile's peso, which was up 0.5% after two straight days of losses.

The dollar fell after data showed US consumer prices increased by the most in more than 8-1/2 years in March and underlying inflation picked up as more parts of the economy reopened. But market experts noted that the Fed's stance on inflation had helped the market price in the data.

"It wasn't a blowout number by any stretch, it is higher than the expectation by a tenth of a percent, but (Fed Chair Jerome) Powell did a very good job of jawboning. He told everybody for the last two weeks 'don't worry, don't worry, don't worry,'" said Ken Polcari, managing partner at Kace Capital Advisors in Jupiter, Florida.

Investment bank JPMorgan recommended selling emerging market currencies on Tuesday, citing the likelihood of an extended period of underperformance in EM growth versus developed markets, renewed "idiosyncratic risks in large EMs" as well as rising COVID cases and slower vaccination rollouts in developing economies.

Brazil added an additional 1,480 people to its COVID-19 death toll on Monday, as a looming investigation of how the government has handled the outbreak puts increased pressure on right-wing President Jair Bolsonaro.

After forecasts of a strong run for EM at the start of the year, many big banks have since turned more bearish.

In Peru, the sol currency and the stock index made slight moves after a day of turbulence when markets were spooked by a socialist surge in presidential elections.

Socialist Pedro Castillo and conservative Keiko Fujimori are projected to go into a run-off vote.

"We think that given the divergent campaign proposals of Mr. Castillo and Ms. Fujimori, there will likely be increased uncertainty regarding Peru's outlook," said Credit Suisse analyst Alberto J. Rojas.

With the Dow Jones Industrial Average in the red, Latin American shares fell.

Brazil's Bovespa lost 0.4%, although food retailer GPA SA rose 5.5% after the announcement of a potential IPO related to its e-commerce unit CNOVA.

Colombian stocks extended losses to a fourth day, while Chile's IPSA index retreated from two-week highs.

Reuters