Latam FX hits seven-month low as hot US inflation lifts dollar
TLT•Latin American currencies fell to a seven-month low after stronger-than-expected US inflation data lifted the dollar and Treasury yields. The regional currency index dropped about 1%, while the equity gauge fell 1.3%.
1. Regional markets fall
Latin American currencies fell to a seven-month low on Tuesday after US consumer prices rose more than expected in October, reinforcing expectations of Federal Reserve rate hikes. The regional currency index fell about 1%, touching its lowest level since April, and the regional equity gauge dropped 1.3%.
2. Rate outlook shifts
The dollar rose 0.4% against a basket of major currencies, while Treasury yields rallied. Traders fully priced in two 25-basis-point Fed rate hikes by March, with the first expected in December. A stronger dollar and higher US yields typically draw capital toward US assets and weigh on emerging-market currencies and stocks.
3. Country markets weaken
Brazil’s real fell 1.6% to its weakest level since October 26, and its equity benchmark lost 0.4%. Colombia’s stock index dropped 2.4% as annual inflation edged up to 6.30% in October from 6.29% in September. Mexican shares fell 0.1%, putting them on track to end a five-session winning streak, while the peso lost 0.9%.
