Strong dollar dents currencies; Latam stocks join global sell-off

Emerging market currencies took a hit on Thursday as surprisingly chipper US retail sales data sent the dollar rising, while stocks followed global markets into the red on China woes.

Brazil's real led the charge in Latin America, losing 0.5%. The Economy Ministry sharply raised its forecasts for inflation measured by the IPCA consumer price index to 7.9% this year, from 5.9% previously.

The central bank's hiking cycle to control inflation has helped the currency from a spiral as the political backdrop becomes cloudier going into 2022 elections.

"The environment for the real is likely to remain difficult; among other things, domestic factors such as President Jair Bolsonaro's unsteady policies limit the real's appreciation potential," said Alexandra Bechtel, an FX and EM analyst with Commerzbank.

Brazil's federal electoral court said it is set to probe the funding of last week's rallies in support of Bolsonaro, who is down in the polls as citizens grew disillusioned by his handling of the pandemic which also threw up allegations of corruption.

Political ructions rattled Argentina as well after Interior Minister Eduardo de Pedro offered his resignation along with several other hard-left officials, signalling a rift within the ruling coalition after a bruising primary election loss.

Latam currencies weaken as dollar firms, El Salvador's bitcoin adoption hits snags

Argentine stocks dropped 2.5%, on course for their sharpest one-day loss in 12 weeks. Argentine markets had welcomed a lead for the conservative opposition in mid-terms primaries earlier this month.

Argentina's economy is predicted to grow 4% in 2022, while inflation is expected to hit 33%, according to a draft budget released overnight. The government has struggled with runaway inflation, currently at 51.4%, and debt restructuring.

Most other Latam currencies fell as the dollar was lifted following upbeat US retail sales data, But separate data showed weekly jobless claims rose. All eyes are on the US Federal Reserve's stance next week.

EM stocks fell 1%, on course for their worst session in four weeks, tracking Wall Street and dented by worries over weak data from China and Beijing's increasing crackdowns on businesses.

China is a major destination for Latam's basic material exports.

Brazil's Bovespa equity index dropped 1.3% extending losses to a third straight session, weighed the most by miner Vale as iron ore prices fell.

But Brazilian logistics company Log-In Logistica Intermodal soared 37% after Swiss shipping group MSC made an unsolicited offer to buy a controlling stake of up to 67% in it.

But Mexico's IPC index bucked the trend, up 0.7% led a 8% jump in utility Grupo Carso.