LatAm assets rally as weaker dollar, commodities fuel weekly gains
BRASILIA: Latin American stocks were set for their strongest week in two months and currencies for their biggest weekly gain in more than four months, as persistent US dollar weakness and higher commodity prices buoyed demand for regional assets.
The MSCI Latin America equities index climbed 2.9 percent, while the regional currency gauge gained 0.7 percent.
Regional assets rebounded, drawing support from a weaker US dollar that slipped to a three-month low this week as investors grappled with US long-term Treasury yields reaching multi-decade highs over fears of prolonged inflation.
Latin American markets were under pressure last week, weighed down by the rotation towards tech-heavy Asian bourses and Brazil’s fiscal outlook ahead of October’s elections.
Some investors, however, see the region’s broader shift toward centre-right political leadership as supportive.
“We’ve actually seen a pretty constructive story across the LatAm countries. You’ve seen a movement much more towards sort of center-right candidates. And I think that has been viewed positively by the market,” said Rohit Chopra, portfolio manager, emerging markets equity at Lazard Asset Management.
Though Chopra cautioned that higher US long-term debt yields could increase the cost of capital for emerging markets. Investors will turn to the Federal Reserve chair’s remarks next week at its annual conference for clues on the interest-rate outlook.
Higher commodity prices provided an additional boost to the regional markets.