Latam assets hit multi-week lows on US-Iran stalemate, Fed rate worries
EWZ•Latin American stocks fell 1.3% and currencies lost 0.6% as a US-Iran stalemate lifted oil prices and concerns about further Federal Reserve rate hikes weighed on sentiment. Colombia’s peso fell 2.3% to its lowest level since early July, while Mexico’s peso hit its lowest since April 2.
1. Regional markets retreat
Most Latin American assets slid to multi-week lows on Monday. Brent crude gained 2% after U.S. President Donald Trump rejected Iran’s peace proposal to resolve the conflict and reopen the Strait of Hormuz; the MSCI Latin American currency index fell 0.6% to an over two-month low, and its stocks equivalent dropped 1.3% to more than a one-month low.
2. Currencies under pressure
The Colombian peso fell 2.3%, reaching its lowest levels since early July, while the Mexican peso lost more than 1% and hit its lowest since April 2. Peru’s sol also fell more than 1%, Brazil’s real declined 0.8%, and the Chilean peso weakened 0.7%. Colombian officials reportedly held technical discussions with IMF officials over several weeks, particularly about securing financing, three sources with knowledge of the matter said.
3. Rates and election focus
U.S. Treasury yields remained elevated after the Federal Reserve’s rate hike earlier this month, with markets pricing in further hikes; the 10-year yield was last at 5.234%, its highest level since 2007. Investors were also watching Brazil’s October 4 first-round presidential vote, with President Luiz Inacio Lula da Silva and Senator Flavio Bolsonaro statistically tied in a simulated runoff, according to two polls.
