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Weaker Greenback Buoys EM FX, USDBRL Breaches Fibonacci Support

  • Broad weakness in the dollar to start the week and firm major equity indices have bolstered EMFX with the JPMorgan emerging market currency index rising 0.85%.
  • Indeed, the stabilisation in risk sentiment has provided strong tailwinds for Latin American currencies, allowing MXN, BRL and CLP to resume their short-term technical uptrends.
  • The Chilean peso is leading the regional rally, with USDCLP falling back below 800 and down roughly 1.65%. The more moderate stance of the incoming regime, highlighted by the appointment of Mario Marcel as finance minister, is continuing to underpin the peso after the significant underperformance throughout H2’2021.
  • USDBRL also down over one percent following the break of 5.3885, the Nov 11 low which has immediately prompted weakness below 5.3249, 50.0% of the Jun - Oct rally last year. Obviously, the focus will be on Wedesday’s Copom decision/statement where Goldman Sachs expect the Copom “to acknowledge growing downside risks to real activity and to recognize the growing dissemination of inflation pressures, including among highly inertial components such as services and core.”
  • The BanRep Monetary Policy Report headlines the LatAm calendar later today with Chile economic activity and Peru inflation scheduled to kick off February’s docket.
    • USDMXN down 0.86% at 20.6268
    • USDBRL down 1.35% at 5.309
    • USDCLP down 1.7% at 799.34
    • USDCOP down 0.47% at 3938.5
    • USDPEN down 0.31% at 3.839
    • BBG Dollar Index down 0.37% at 1185.88

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