EMERGING MARKETS-Brazil's real gains on rate-hike bets, but loses for the week
By Ambar Warrick July 23 (Reuters) - Brazil's real led gains across Latin American currencies on Friday as a spike in inflation pointed to more hawkish moves by the central bank, although the currency and most of its regional peers were set to end the week lower. The real jumped 0.6% after data showed Brazilian consumer inflation in the month to mid-July hit its highest in 17 years, pushing annual inflation even further beyond the central bank's target. With Friday's reading, a 100 basis point interest rate hike by the central bank seems likely at its August meeting. The move would be a fourth hike by the bank this year, and put lending rates at pre-pandemic levels of 5.25%. The expectations for a hike come amid similar moves by other EM banks, with inflation levels rising across the globe as more economies reemerge from COVID-related lockdowns. Russia's central bank raised rates by 100 basis points on Friday, its steepest hike since 2014. " Restrictions of the pandemic are fading, leading to higher private consumption and consumer confidence which increases demand and puts pressure on prices," analysts at Rabobank wrote in a note, adding that loose monetary policy through the pandemic, and high commodity prices were also bound to shore up inflation. "Nominal and real rates of EMs have steadily decreased over the past year partly as a result of the pandemic. But it is likely that 2021/22 will see a rise in interest rates." Colombia's peso was the worst performing currency in Latin America (Latam) for the week, and was set to lose around 1.3%. Volatility in the oil market, coupled with fears of social unrest over a new tax reform had hurt the peso. Most other units were also set for weekly losses, as rising COVID-19 cases across the globe brewed fears of slowing economic growth and spurred large moves out of risk-driven assets. Brazil's real was set to lose about 1%, while Mexico's peso was down 0.7%. But Chile's peso, which fell 0.2% on Friday, was the sole weekly gainer, as steady vaccinations saw the country relax several COVID-related restrictions. Chile announced on Thursday that its citizens and foreign residents would be allowed to travel outside the country if they are fully inoculated against coronavirus. Latin American stocks were flat in early trade, and were set to lose 1.7% this week. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1311.29 -1.14 MSCI LatAm 2534.83 -0.12 Brazil Bovespa 125723.49 -0.34 Mexico IPC 50232.13 -0.02 Chile IPSA 4238.02 -1.17 Argentina MerVal - - Colombia COLCAP 1245.70 -0.49 Currencies Latest Daily % change Brazil real 5.1818 0.55 Mexico peso 20.0372 0.34 Chile peso 754.95 -0.21 Colombia peso 3869.85 -0.09 Peru sol 3.911 0.56 Argentina peso 96.4200 -0.01 (interbank) (Reporting by Ambar Warrick Editing by Marguerita Choy)
