Market News

EMERGING MARKETS-Currencies deepen losses ahead of Fed minutes - REUTERS

AUGUST 18, 2022

 * S.African rand slides 1.8% as retail sales declines
    * Fed minutes due at 1800 GMT (2 p.m. ET)
    * Latam FX slide sharply, BRL down 0.7%, COP slides 1.2% 

    By Susan Mathew
    Aug 17 (Reuters) - South Africa's rand deepened losses on
Wednesday, hit by falling retail sales, while Latin American
currencies fell heavily as the dollar inched up ahead of minutes
from the U.S. Federal Reserve's last policy meeting. 
    The rand fell almost 2% after data showed South
African retail sales fell 2.5% year on year in June after rising
by 0.1% in May.
    The rand was last seen at 16.66 to the dollar, set for its
steepest one-day decline in two weeks. 
    "The hard activity data out of South Africa for June suggest
that the economy contracted by around 1.0% quarter-on-quarter in
the second quarter, and we think that activity will remain weak
in the coming quarters too," said Virag Forizs, Africa economist
at Capital Economics.
    The dollar was up 0.1% ahead of Fed minutes due at
2:00 p.m. ET (1800 GMT).
    Investors will look for clues on the size of the Fed's next
interest rate hike. Bets for a third 75 basis points (bps) hike
fell after softer-than-expected U.S. inflation data last week.
Traders are now more-or-less split between the probability of a
50 bps and 75 bps move.          
    Brazil's real was down 0.7%. 
    Data as measured by the IGP-10 price index showed inflation
in Brazil fell 0.69% in August, compared to a 0.60% gain in
    Brazil's central bank has hiked interest rates aggressively
to tame inflation, raising them to 13.75% from a record low of
2% in March 2021. 
    Meanwhile, the two leading candidates in presidential
elections due in October, leftist former president Luiz Inacio
Lula da Silva and far-right president Jair Bolsonaro, began
their campaigns on Tuesday.
    "Brazil's fiscal outlook remains fragile, as the South
American country's gross debt is currently around 20 percentage
points higher than peers in LatAm or EMs in the G20", said
Mauricio Une, head of South America macro strategy at Rabobank.
    "Whoever wins the election will still have to deliver
reforms so Brazil's debt can converge down towards the level of
peers over the next years."
    The real has fallen every year till last year since
Bolsonaro took office in 2018. During Lula's term between
2003-2010, the real gained every year except 2008, when markets
were roiled by the global financial crisis.  
    Mexico's peso slipped 0.6%, set for its worst session
in two weeks, while Colombia's peso slumped 1.2%,
extending Tuesday's 2.2% slide. 
    Easing copper prices weighed on Chile's peso.
Chile is the world's biggest producer of the red metal.


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