SAO PAULO, Jan 12 Yields on Brazilian interest
rate futures tightened sharply on Thursday after the central
bank cut rates more aggressively than expected to fight a deep
After markets closed on Wednesday, the central bank reduced
its benchmark Selic overnight lending rate by 75 basis points to
13.00 percent, the lowest in two years.
Most traders expected a 50 basis point reduction, after the
bank twice cut the Selic by a moderate 25 basis points despite
the economic rout.
Before the Wednesday central bank decision, rate futures
indicated a three-quarters chance of a 50 basis point cut and a
one-quarter probability of a larger cut.
The surprise led traders to increase bets on a deeper
rate-cutting cycle, pricing that the Selic could fall as low as
9.7 percent. On Wednesday, they bet it would fall to 10.25
Brazilian stocks also rose as traders wagered that lower
interest rates could boost economic activity and lift corporate
Higher prices of oil and iron ore also boosted shares of
blue-chip oil company Petróleo Brasileiro SA and
miner Vale SA, fanning a rally of the benchmark
Bovespa stock index.
The Brazilian real strengthened 0.9 percent, tracking
a global pickup in appetite for emerging market assets.
Many traders had expected U.S. President-elect Donald Trump
would take a strong protectionist stand in his first news
conference after the election and dialed down those bets after
his remarks on Wednesday provided few policy details.
The Mexican peso, the currency that has been most
affected by Trump's rhetoric, strengthened 1 percent after
hitting a new historic low the day before.
Key Latin American stock indexes and currencies at 1330 GMT:
Stock indexes daily % YTD %
MSCI Emerging Markets 899.90 1.49 2.84
MSCI LatAm 2454.95 3.39 1.44
Brazil Bovespa 64124.62 2.69 6.47
Chile IPSA 4227.19 0.41 1.83
Chile IGPA 21071.78 0.36 1.63
Currencies daily % YTD %
Brazil real 3.1637 0.86 2.70
Mexico peso 21.6350 1.04 -4.12
Chile peso 663.3 1.13 1.12
Colombia peso 2920.5 1.64 2.77
Argentina peso (interbank) 15.8000 0.35 0.47
Argentina peso (parallel) 16.75 0.60 0.42
(Reporting by Bruno Federowski)