March 31, 2017 / 3:33 PM / 5 months ago

EMERGING MARKETS-Mexico peso weakens on smaller interest rate hike

    By Bruno Federowski
    SAO PAULO, March 31 (Reuters) - The Mexican peso weakened on
Friday after the nation's central bank slowed the pace of
interest rate hikes, triggering profit-taking after the
currency's recent rally.
    The peso slipped 0.5 percent after the board of the Banco de
Mexico unanimously decided on Thursday to raise its benchmark
rate by a quarter percentage-point to 6.50 percent, following
four straight 50-basis-point hikes.
    The move followed a 10 percent increase in the value of the
peso so far this year, which helped ease inflationary pressures.
    Bets that U.S. President Donald Trump will not impose big
tariffs on Mexican exports to the United States lifted the
currency from a slump last year - its steepest since 2008.
    The Brazilian real weakened 0.7 percent as traders
tried to influence the March Ptax rate, a benchmark calculated
by the central bank on the last trading day of every month.
    Lower iron ore prices also weighed on demand for Brazilian
assets, with shares of miner Vale SA dragging most on
Brazil's benchmark Bovespa stock index.
    Losses were limited by rising shares of wood pulp and paper
producers, such as Fibria Celulose SA and Klabin SA
, on hopes that a rebound in pulp prices would
continue in coming months.
    Shares of drugstore chain Raia Drogasil SA and
drugmaker Hypermarcas SA fell after the government
authorized a 4.76 percent increase in regulated pharmaceutical
prices, far smaller than the 12.5 percent raise allowed last
year.
    Banco BTG Pactual SA analysts wrote in a note to clients
that the smaller hike, though somewhat expected, would probably
compress both companies' margins.
    
    Key Latin American stock indexes and currencies at 1515 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
                                   Latest             
 MSCI Emerging Markets               959.08    -1.07    12.43
 MSCI LatAm                         2622.12    -1.37    13.58
 Brazil Bovespa                    65011.23    -0.39     7.94
 Mexico IPC                        48897.18     0.07     7.13
 Chile IPSA                         4793.90    -0.52    15.48
 Chile IGPA                        24009.78    -0.47    15.80
 Argentina MerVal                  20275.05     0.13    19.84
 Colombia IGBC                     10164.40    -0.24     0.36
 Venezuela IBC                     43727.90     0.26    37.92
                                                             
 Currencies                                  daily %    YTD %
                                              change   change
                                                      
                                     Latest           
 Brazil real                         3.1656    -0.73     2.64
 Mexico peso                        18.8320    -0.54    10.15
 Chile peso                           661.5     0.23     1.39
 Colombia peso                         2893    -0.25     3.75
 Peru sol                             3.249    -0.06     5.08
 Argentina peso (interbank)         15.3700     0.26     3.29
                                                      
 Argentina peso (parallel)            15.83     0.38     6.25
                                                      
 

 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
  

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