BRISILIA: Most Latin American currencies dropped against a firm dollar on Friday, with investors awaiting Colombia’s rate decision at the end of a week marked by rate cuts from regional peers, while Russia held rates, drawing limited reaction from the rouble.
The MSCI index tracking Latam currencies shed 0.1%, on track to log its weakest weekly performance in four, with the dollar headed for second weekly gain. That comes in the face of Japan’s historic rate hike and Switzerland’s surprise rate cut highlighting the gap between the Federal Reserve and others in interest rate settings.
Brazil’s real, Chile’s peso, Peru’s sol fell between 0.1%-0.4% against the greenback.
The stocks gauge also fell 0.3%, but was set for a weekly gain.
After a raft of policy decisions across developed and emerging markets throughout the week, Russia held rates steady at 16%, warning inflationary pressure remained high and tight monetary conditions would be maintained for a long time to try to return inflation to the 4% target.
The rouble weakened towards the 93-per-dollar mark, struggling to latch on to support from high oil prices and favorable month-end taxes.
“We still think inflation will end the year above target due to rapid economic growth and loose fiscal policy, but it’s looking more likely that the central bank might start an easing cycle in the third quarter once inflation has clearly reached a peak,” said Liam Peach, senior emerging markets economist, Capital Economics.
All eyes will be on Colombia’s monetary policy decision during the day. A Reuters poll reflected expectations of a 50-basis-point cut, double the December and January cuts. Colombia’s peso slipped 0.1%, while stocks dropped 0.2%.
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