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EMERGING MARKETS-Chile's peso hits 1-month high as cenbank doubles rates

EMERGING MARKETS-Chile's peso hits 1-month high as cenbank doubles rates

reuters.com · 09/01/2021 15:18
EMERGING MARKETS-Chile's peso hits 1-month high as cenbank doubles rates

Chile cenbank hikes key rate to 1.5%

Mexican cenbank raises GDP forecast

Brazil GDP contracts in June quarter

El Salvador Congress backs fund for bitcoin ahead of adoption

Adds market details, updates prices

By Susan Mathew and Ambar Warrick

- Chile's peso rose as much at 1.6% to hit a one-month high on Wednesday after the central bank doubled the key interest rate overnight, while other Latin American currencies also firmed as the dollar languished near four-week lows.

As a rapid COVID-19 vaccination program helps the world's top copper producer resume economic activity and inflation ticks upward, Chile's central bank raised the benchmark rate to 1.5% from 0.75%, more than a 25 basis-point hike forecast in a Reuters poll. nL1N2Q233X

On Wednesday, the bank revised upwards its prediction for 2021 GDP growth to between 10.5% and 11.5% from a previous estimate of 8.5% to 9.5%. Data showed economic activity rose 18.1% in July. nC0N2HW01P

"The hawkish surprise should support CLP in the near term," Citi strategists said in a note, but added they stayed on the sidelines pending a pension withdrawal vote and upcoming elections.

The hike comes on the heels of hawkish moves across several emerging markets, as inflation heats up in the aftermath of the pandemic. Brazil and Mexico had both recently moved rates upwards.

State-owned Codelco, the world's largest copper producer, said it has reached an early collective bargaining agreement with the five unions representing workers at its key El Teniente mine, easing some worries about Chilean copper supply. nL1N2Q300B

Mexico's peso MXN= hit a two-week peak, up 0.4% after the central bank raised its 2021 economic growth forecast to 6.2% from 6% previously. Inflation is seen at 5.7% in the final quarter, up from a prior prediction of 4.8%. nL1N2Q221T

After some initial uncertainty, the monetary authority said on Tuesday that the International Monetary Fund's special drawing rights may be used by the federal government to meet its foreign currency obligations. nL1N2Q236Z

Mexican stocks .MXX tumbled nearly 2% from record highs.

Colombia's peso COP= hit a two-month high, extending gains to a fourth straight session as rising inflation expectations pointed to a likely interest rate hike.

Brazil's real BRBY was flat as data showed GDP contracted by 0.1% in the June quarter as the new wave of the coronavirus pandemic hit demand. The central bank warned markets to revise 2021 GDP expectations lower after the data. nL1N2Q30TY

But the central bank chief said he sees higher inflows strengthening the currency, while focus also turned to a proposed tax reform. nL1N2Q31WD

In El Salvador, the Congress on Tuesday approved a law to create a $150 million fund to facilitate conversions from bitcoin to U.S. dollars ahead of the Central American country's planned adoption of the cryptocurrency as legal tender next week.

Key Latin American stock indexes and currencies:


Daily % change

MSCI Emerging Markets .MSCIEF






Brazil Bovespa .BVSP



Mexico IPC .MXX






Argentina MerVal .MERV








Daily % change

Brazil real BRBY



Mexico peso MXN=D2



Chile peso CLP=



Colombia peso COP=



Peru sol PEN=PE



Argentina peso (interbank) ARS=RASL



Chilean peso jumps after rates hike, lagged peers in Augusthttps://tmsnrt.rs/3kDC30O

(Reporting by Susan Mathew and Ambar Warrick in Bengaluru
Editing by Emelia Sithole-Matarise and Matthew Lewis)

((susan.mathew@thomsonreuters.com; +91-80-6287-2704;))