Latam FX range bound on caution ahead of Powell speech

Latin American currencies traded in a tight range on Friday ahead of a highly anticipated speech by Federal Reserve chief Jerome Powell at an annual conference, while the Mexican peso extended its declines to a third straight day.

Currencies in South and Central America took cues from emerging markets elsewhere, which remained flat as investors held their bets in anticipation of Powell's speech at 1400 GMT (10 a.m. ET) and whether or not the US central bank will tweak its ultra-loose monetary policy.

"There is still plenty of uncertainty about how far he (Powell) can commit to the timing of the taper as the Delta variant clouds over the economy, even though the expansion only a month ago was seemingly roaring ahead," said Art Hogan, chief market strategist at National Securities in New York.

The MSCI's index for Latin American currencies was up 0.1% by 1259 GMT, with Brazil's real rising 0.3% against the dollar.

The real is on track for a weekly gain of 2.6%, making it one of the top performing emerging market currencies and the best Latin American unit for the week.

Rebound in commodity prices, weaker dollar lift Latam currencies

Still, concerns remained about Brazil's stretched fiscal spending, especially due to the pandemic even as the government marked some progress in negotiations with the Supreme Court in delaying mandated payments.

Mexico's peso inched lower, marking its third straight day of declines. Minutes of the Mexican central bank's recent meeting showed some members of the rate-setting board believed inflation could rise further this year, suggesting that more interest rate hikes by the bank were a possibility, which could support the peso.

The Argentine peso was flat, as investors are now waiting for the country's largest province, Buenos Aires province, to wrap up its $7 billion restructuring of foreign currency bonds on Friday after more than 16 months of negotiations.

In Peru, Congress pushed back a key vote to confirm or reject a new leftist Cabinet nominated by President Pedro Castillo to Friday, extending uncertainty as conflicts between the executive and the legislature loom large.

Rising copper prices on the back of a softer dollar lifted the Chilean peso, which is now set to clock small weekly gains.