Latam FX rises after US economic worries weigh on dollar

BRASILIA: Most Latin American currencies firmed on Friday as the dollar tumbled after signs of a cooling US labor market complicated the Federal Reserve’s policy path, while investors also scrutinized the latest US tariff comments.

US job growth slowed more than expected in July while the prior month’s figures were revised sharply lower, data showed, indicating that the labor market could be showing signs of stalling, adding to some hopes of an interest rate cut in September.

“A higher likelihood of lower US rates can make the dollar relatively less attractive and that is a very favorable headwind for Latin American currencies; we are seeing quite a bit of relief” said Pablo Riveroll, fund manager & global head of equities research at Schroders.

The dollar index edged down 0.9% following the data, boosting most emerging market currencies. The MSCI index tracking Latin America currencies was up 0.4%, set for marginal gains this week.

Still, a recovery in the dollar this week after a US-European Union trade deal hit the euro had stalled the momentum in emerging markets, with broader indexes tracking developing market stocks and currencies heading for weekly declines.

Meanwhile, investors globally were also grappling with a fresh set of US tariffs imposed on dozens of trade partners, that will come into effect on August 7.

In Latin America, Brazil’s real was up 0.8% and was on track for its biggest one-week rise in over a month as the country secured exemptions from 50% US tariffs on key exports.

The local government expects to announce next week measures of a contingency plan it has been preparing to help businesses to cope with the levies.