* Credit conditions in Brazil improved in March- C.bank
* Treasury yields hit 2-week high
By Shashank Nayar
April 29 (Reuters) - Latin American currencies fell on
Thursday as a jump in U.S. Treasury yields and a stronger dollar
outweighed strength in commodity prices, while regional stocks
hovered around three-month highs.
Mexico's peso dropped 0.9%, while Chile's peso
shed 1.2%, leading losses across Latam despite expectations of
improving demand pushing up oil and copper prices.
U.S Treasury yields hit two-week highs on Thursday after
U.S. President Joe Biden late on Wednesday proposed trillions of
dollars in new spending, and after data showed American economic
growth accelerated in the first quarter. Investors expect U.S.
inflation to spike on the new spending measures.
This in turn pressured high-risk high-yield currencies in
emerging markets, as the difference in yields between risky and
risk-free debt narrowed.
“It is a little bit of a surprise what we have seen this
morning as there doesn’t seem to be a clear rational driving the
currency movements and it seems like the market are cutting
straws a little bit," said Christian Lawrence, senior market
strategist at Rabobank.
"The Mexican peso generally drops when benchmark U.S. yield
rises which seems to be the case, but we don't see investor risk
appetite being much affected."
Latam currencies had rallied to three-month highs on
Wednesday after dovish signals from the Federal Reserve made
higher yielding assets appear more attractive.
Brazil's real was flat after jumping to its highest
point since mid-February in the previous session.
Credit conditions in Brazil improved in March, central bank
figures showed, as a broad measure of consumer and business
default ratios held steady at a decade-low, lending spreads
narrowed and credit growth rose.
Even then, public debt levels have surged to record highs in
the country, straining government finances as a damaging wave of
COVID-19 infections prompted more spending.
Colombia's peso fell 0.3% despite strong oil prices.
A Reuters poll showed the country's consumer prices are set to
go up in April on food and public utility price pressures and
despite ongoing effects from the coronavirus
pandemic.
Other Latin American currencies including the Argentine peso
and Peruvian sol edged lower.
Latam stocks were muted in early trade, with the MSCI's
index of regional stocks trading flat around
three-month highs.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1365.47 0.04
MSCI LatAm 2437.33 0.13
Brazil Bovespa 120618.66 -0.36
Mexico IPC 48911.09 0.87
Chile IPSA 4561.21 -0.55
Argentina MerVal 49860.72 -0.366
Colombia COLCAP 1292.17 0.47 Currencies Latest Daily % change
Brazil real 5.3546 0.10
Mexico peso 20.0720 -0.85
Chile peso 704.5 -1.21
Colombia peso 3704 -0.27
Peru sol 3.773 -0.11
Argentina peso 93.4900 -0.05
(interbank)
(Reporting by Shashank Nayar in Bengaluru
Editing by Marguerita Choy)
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