Latin American currencies softened against a solid US dollar on Thursday, a day after the US Federal Reserve kept interest rates steady and its Chair Jerome Powell said policymakers saw no strong reason to raise or lower rates.
Most stock markets in Latin American broadly fell along with their global peers, hurt especially sharply by weakness among energy stocks on diving oil prices. MSCI's index of Latin American currencies fell 1.1%, pressured by the resolute dollar, and was on track for its worst day in more than a month.
Powell's comments prompted interest rate markets to reduce the priced-in expectation of seeing lower US borrowing costs by the end of 2019, supporting the dollar. There was nothing from the policy statement or the press conference to indicate the Fed was contemplating any near-term changes to monetary policy, HSBC US Economist Ryan Wang wrote in a note. Brazil's real slid 1.3%, on course for its worst one-day showing in more than a week. Growth in Brazilian manufacturing activity slowed in April to its weakest pace in six months, data showed.
Brazilian stocks dropped 0.7%, weighed by losses across most sectors. Prices of some local stocks adjusted for moves seen in their corresponding American depository receipts (ADR) on Wednesday, when equities in Sao Paulo did not trade due to a holiday for Labor Day. Local shares of iron ore miner Vale SA fell 2.5%, following Wednesday's 3.1% slide in its ADR. State-run oil firm Petroleo Brasileiro SA (Petrobras) saw its common shares and preferred shares fall 1.2% and 1.6%, respectively, amid a slide in oil prices and a 2% fall on Wednesday in Petrobras' ADRs.
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