By Susan Mathew Dec 5 (Reuters) – Latin American currencies fell on Monday, with Mexico’s peso down almost 2%, underperforming emerging market peers as the dollar firmed, while investors also kept an eye out for political developments in Brazil. The dollar firmed after recent falls after data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy. With U.S. stocks sliding as the data backed the case for the U.S. Federal reserve to stay hawkish, Latam stocks followed suit. Mexico’s peso extended declines after losing around 0.3% last week, with eyes on November inflation later in the week. Colombia’s peso slipped, retreating further from the more than two-month high hit last week. Investors will also be watching for central bank policy meetings in Chile, Peru and Brazil this week. “We expect (Brazil’s) Selic basic interest rate to be held at 13.75% until September 2023, acknowledging that the risk of maintaining the rate at this level has increased with the recent rise in fiscal uncertainty,” Credit Suisse economists said. “For now, we expect a Selic rate of 11.50% at year-end 2023.” Brazil’s real lost 0.7% after jumping 3.7% last week. All eyes are on Brazilian president-elect Luiz Inacio Lula da Silva and his transition team, as investors await further clarity on the make-up of his cabinet, especially the economy minister, and likely fiscal policies. “Whoever takes the helm (of the economy ministry) will have a lot on their plate, including the unanswered question of how big the fiscal expansion will be in 2023,” JPMorgan economists said. “We remain of the view that a watered-down version, increasing expenditures by 1.2% of GDP, will materialize, but reckon that asymmetry is tilted toward higher expenditures.” “Such an alternative would strike down riskier scenarios, but still points to a challenging path for public debt over the long term,” they said. In Colombia, consumer prices rose 0.77% in November, official data showed on Monday, taking cumulative 12-month price growth to 12.53%, more than four times the central bank’s target. Meanwhile, the International Monetary Fund said later on Friday it had reached an agreement with Argentine authorities on a third review under its Extended Fund Facility Arrangement, which could give the South American country access to around $6 billion. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 983.51 0.99 MSCI LatAm 2186.20 -1.76 Brazil Bovespa 110141.15 -1.59 Mexico IPC 51079.87 -0.3 Chile IPSA 5275.17 -0.29 Argentina MerVal 169132.61 -0.329 Colombia COLCAP 1232.52 -0.68 Currencies Latest Daily % change Brazil real 5.2516 -0.74 Mexico peso 19.7960 -2.13 Chile peso 883.7 -0.20 Colombia peso 4803.1 -0.72 Peru sol 3.845 -0.50 Argentina peso 169.1200 -0.61 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Jan Harvey)
