The Mexican peso led declines in Latin American currencies on Tuesday, January 16th, while stocks were also in the red as investors grappled with the possibility that the U.S. Federal Reserve may not cut interest rates as soon as previously expected.
MSCI’s index for Latin American currencies slid 0.8%, with Mexico’s currency down 1.5%.
The peso, which enjoyed gains of nearly 15% in 2023 due to its interest rate differential with the U.S. has lost momentum this year, nudging past the 17 to the dollar mark. Globally, risky assets suffered while the U.S. dollar and Treasury yields rose as hopes of rate cuts from global central banks in March were dampened by hawkish remarks from some European Central Bank officials.
Escalating disruptions to Red Sea shipping amid the Israel-Hamas conflict also weighed on sentiment.
“Markets again have a risk-off feeling to them,” said Juan Manuel Herrera, senior economist at Scotiabank in a note. “Middle East/Red Sea risks continue to grow, and central bankers are starting to highlight how this is a risk to recently encouraging inflation data due to supply chain disruptions.”
San Miguel Times