BRASILIA: The Brazilian real lost ground on Friday but still looked poised to notch its third straight week of gains after a surprise interest rate hike earlier in the week, while tumbling crude prices dragged down the Mexican peso.
The MSCI index of Latam currencies touched a record high earlier this week, but choppiness in crude and foreign exchange markets as a result of the Israel-Iran conflict, particularly for the dollar, has weighed on sentiment since.
The Mexican peso slid to a two-week low against the dollar on Friday as Brent crude prices plunged nearly 3% after the White House postponed a decision on US involvement in the ongoing conflict. Oil is a key export for Mexico.
Oil prices had soared almost 3% the day before after Israel struck nuclear targets in Iran and Iran, OPEC’s third-largest producer, retaliated with missiles and drones. With both sides showing no signs of de-escalation, markets remained on edge.
Mexico’s IPC eked out a modest 0.4% gain, but still looked set for its roughest week in almost three months.
Banxico faces a tough balancing act at next week’s rate meeting, as recent data showed inflation racing past its 3% target. Beneath the surface, however, Mexico’s economy only just dodged a technical recession in the first quarter and now grapples with sluggish domestic demand and jitters over US trade policy.
Meanwhile, Brazil’s real edged down to 5.52 per dollar as traders returned from a holiday, though it had briefly touched an eight-month high of 5.47.
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