Latin American assets extend losses as dollar rises and high yields weigh
ILF•Latin American equities and currencies fell as the dollar rose and US Treasury yields climbed. The MSCI Latin American equity index dropped 1.7%, while its currency index fell 1.1%; Mexico held its benchmark rate at 6.50%.
1. Regional markets decline
Most Latin American assets fell as a stronger dollar and stalled negotiations between the United States and Iran weighed on sentiment. The MSCI Latin American equity index declined 1.7%, and its currency index fell 1.1%, its biggest daily drop since July 29. The Colombian peso dropped 2.1% to its lowest level since July 3, while Chilean stocks fell 2.3%.
2. Mexico and Brazil policy
The Bank of Mexico held its benchmark rate at 6.50% but dropped guidance that explicitly suggested borrowing costs would remain there. The decision followed data showing inflation rose more than expected in the first half of September, and the peso weakened 1.2% to its lowest level since early April. Brazil's central bank projected inflation near its 3% target at the policy horizon for its next rate decision, while the real fell 0.4% and the Bovespa declined 0.8%.
