November 29, 2019 / 5:49 PM / 16 days ago

EMERGING MARKETS-Chile's peso jumps as intervention jolts shorts, Brazil's real drops

    * Chile's peso sees second best day in 10 years on
intervention
    * Brazil's real slides 1%, intervention's effect wanes

    By Aaron Saldanha
    Nov 29 (Reuters) - Chile's peso starred among Latin American
currencies on Friday, bouncing off an all-time closing low on
news of a chunky central bank intervention program, which set it
on course for its second best day in more than a decade.
     The country's central bank late on Thursday said it would
sell up to $20 billion in foreign currency interventions
starting on Monday aiming to stabilize the peso, which prompted
some short-sellers to scale back bets on further weakness.
 
    "Chile has around $40 billion in reserves," said Guido
Chamorro, a portfolio manager for Pictet Asset Management in
London.
    "This (FX intervention) program is $10 billion plus $10
billion. It is a pretty big number but if it's big a number, it
better work."     
    The announcement had the desired effect despite the release
of data on Friday showing manufacturing production
dropped 5.8% in October from a year earlier, as well as news of
sinking profit at state-owned copper mining giant Codelco.

    Weekly Refinitiv Lipper data ended Nov. 20 showed
international investors were still allocating money to a popular
Chile-focused ETF despite increasingly violent protests
against inequality which have led to over 25,000 people being
detained.      
    Simon Harvey, FX market analyst at Monex Europe, said the
intervention was "deemed credible" but he did not see the
currency firm to under the 800 peso-per-dollar mark due to local
factors such as protests, instead suggesting the Chilean central
bank would allow the currency to weaken but at a slower pace
than market factors dictate.    
    "The central bank is going to have to strike the balance of
cutting rates next week to stimulate growth while not making it
counter-intuitive to their intervention policy in FX markets." 
    Moving in the other direction, Brazil's real weakened
1%, drifting towards a record low hit on Tuesday, as the effects
of central bank intervention wore off. 
    Monex Europe's Harvey said Brazil's real had traded in the 4
to 4.20 reais-per-dollar range for most of the fourth quarter,
which it had recently broken out of, leading to rising political
pressure to bring it back within that range.
    Nevertheless, the weaker currency was providing some
insulation to the local economy from slowing global growth and
tepid external demand, he said.
    Stocks on Sao Paulo's Bovespa dipped 0.4%, as the
energy sector bore the brunt of a 2% decline in Brent crude
futures, with shares of oil firm Petroleo Brasileiro SA
(Petrobras) falling 1%.
    Mexican equities slid 0.5%, largely on losses among
consumer staples and materials, broadly in line with the decline
seen in the peso.
    While Colombia's peso softened 0.5% and stocks
 slipped 0.2%, Argentinean assets marked
time. 
    
    Latin American stock indexes and currencies at 1732 GMT:
    
     Stock indexes              Latest    Daily % change
 MSCI Emerging Markets           1038.90           -1.09
                                          
 MSCI LatAm                      2646.39             0.1
                                          
 Brazil Bovespa                107911.41           -0.35
                                          
 Mexico IPC                     42872.20           -0.53
                                          
 Chile SPIPSA                    4515.26           -0.08
                                          
 Argentina MerVal               34264.79           0.132
                                          
 Colombia Colcap                 1600.71           -0.18
                                          
                                                        
        Currencies              Latest    Daily % change
 Brazil real                      4.2315           -0.38
                                          
 Mexico peso                     19.5520           -0.42
                                          
 Chile peso                        805.8            2.73
                                          
 Colombia peso                   3524.48           -0.38
 Peru sol                          3.402           -0.24
                                          
 Argentina peso (interbank)      59.8500           -0.12
                                          
 

    
 (Reporting by Aaron Saldanha in Bengaluru, Additional reporting
by Marc Jones in London; Editing by Lisa Shumaker)
  
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