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Higher Yields Weighing On Local Currencies Ahead of FOMC Minutes

LATAM FX
  • Higher US yields and lower global equity benchmarks are souring sentiment for LatAm FX on Wednesday. Despite the Bloomberg dollar index only advancing 0.4%, some local currencies are significantly underperforming ahead of the FOMC minutes later today.
  • Bottom of the pile is the Chilean Peso, which has had a notable 2.5% retreat with USDCLP rising back above the 900 mark amid weaker copper prices and Fitch weighing in overnight on the likelihood of ongoing political headwinds after the constitutional vote.
  • In similar vein, USDCOP is extending yesterday’s strong pullback and now resides over 4 and a half percent off yesterday’s lows.
  • As noted, we have Chile GDP on Thursday. The monthly GDP proxy (IMACEC), which has historically tracked the official quarterly GDP figures closely, printed at 0.4% Q/q sa in Q2.
  • Short-term focus remains on the FOMC minutes due at 1900BST/1400ET.
  • Below gives key levels of LatAm markets in current trade:
    • USDMXN up 0.73% at 20.0558
    • USDBRL up 0.45% at 5.1709
    • USDCLP up 2.41% at 901.95
    • USDCOP up 1.53% at 4312.2
    • USDPEN up 0.16% at 3.8444
    • Bbg Dollar Index up 0.43% at 1274.29
    • JPMorgan EM Ccy Index down 0.5% at 50.521
    • S&P E-Mini Future down 40.75 points (-0.95%) at 4266.25
    • WTI Crude Oil (front-month) up $0.33 (0.38%) at $86.85
    • Gold is down $13.9 (-0.78%) at $1761.80
    • Copper Futures down 4.75 (-1.31%) at 357.70
    • US 10-Yr yield is up 11 bps at 2.91%
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  • Higher US yields and lower global equity benchmarks are souring sentiment for LatAm FX on Wednesday. Despite the Bloomberg dollar index only advancing 0.4%, some local currencies are significantly underperforming ahead of the FOMC minutes later today.
  • Bottom of the pile is the Chilean Peso, which has had a notable 2.5% retreat with USDCLP rising back above the 900 mark amid weaker copper prices and Fitch weighing in overnight on the likelihood of ongoing political headwinds after the constitutional vote.
  • In similar vein, USDCOP is extending yesterday’s strong pullback and now resides over 4 and a half percent off yesterday’s lows.
  • As noted, we have Chile GDP on Thursday. The monthly GDP proxy (IMACEC), which has historically tracked the official quarterly GDP figures closely, printed at 0.4% Q/q sa in Q2.
  • Short-term focus remains on the FOMC minutes due at 1900BST/1400ET.
  • Below gives key levels of LatAm markets in current trade:
    • USDMXN up 0.73% at 20.0558
    • USDBRL up 0.45% at 5.1709
    • USDCLP up 2.41% at 901.95
    • USDCOP up 1.53% at 4312.2
    • USDPEN up 0.16% at 3.8444
    • Bbg Dollar Index up 0.43% at 1274.29
    • JPMorgan EM Ccy Index down 0.5% at 50.521
    • S&P E-Mini Future down 40.75 points (-0.95%) at 4266.25
    • WTI Crude Oil (front-month) up $0.33 (0.38%) at $86.85
    • Gold is down $13.9 (-0.78%) at $1761.80
    • Copper Futures down 4.75 (-1.31%) at 357.70
    • US 10-Yr yield is up 11 bps at 2.91%