Latin American currencies strengthened against the dollar on Monday as investors looked toward Fed Chair Jerome Powell’s testimony for clues on the direction of the Federal Reserve’s interest rate policy going forward.
MSCI’s index for Latam currencies was up 0.3% on Monday afternoon, with Colombia’s peso rising for a fourth consecutive session. The currency gained 1% against the dollar to reach its three-week high. The Chilean peso rose 0.1% against the dollar, while Brazil’s real and Peru’s sol both fell against the greenback by 0.1% and 0.2% respectively.
Mexico’s peso fell from its five-year highs, while the country’s automotive production and exports rose in February on a year-on-year basis. Mexico, as well as Brazil and Chile, are set to release inflation data this week.
Set to testify before Congress on Tuesday and Wednesday, investors will be hoping to hear clues from Powell regarding the Federal Reserve’s next move as markets declined on Friday due to fears that interest rates would remain higher for longer.
We are moving towards an expectation for tighter rates,” Cristian Maggio, head of portfolio strategy at TD Securities stated. “There could be a risk that (Powell’s) rhetoric will push interest rates to the upside.”