Commodity-driven Latin American currencies close strong in January

The prices of oil and the metals, driven by expectations of more stimulus in China, strengthened Latin American commodity-linked currencies on the last day of January, also helping most regional units post strong gains in the first month of 2022.

According to Reuters, the real from Brazil was the biggest gainer among its peers with a gain of 1.6%, following a recent surge in Chinese iron ore prices, which hit a five-month high last week. The strength of the value of the mineral, along with expectations of a further tightening of monetary policy in the South American giant, helped the real gain 4.9% in January.

Chile’s weight strengthened 1.5% against the dollar after a rebound in copper prices. Red metal prices rose as the markets of China’s top metal consumers closed for the week-long Lunar New Year holiday. The peso added 6.5% this month and outperformed its regional peers.

The Peruvian sol also benefited from strong copper prices during the month, adding 3.8% in January.

The weight of oil exporter Colombia increased by 0.3% after crude prices remained high due to supply shortages and political tensions in Eastern Europe and the Middle East. Colombia’s central bank also raised its benchmark interest rate by 100 basis points to 4% on Friday, the biggest monthly increase in decades.

For its part, Mexico’s peso rose 1% on Monday but lagged its peers in January amid concerns about slowing economic growth. The data showed that the economy of the Aztec country contracted for the second consecutive quarter in the last quarter of 2021 as it entered a technical recession.

Central bank meeting in the spotlight

This week’s focus is on the decisions of the major central banks. The Bank of England is expected to raise its key policy rate by 25 basis points to combat rising inflation, while the European Central Bank keeps rates on hold and clings to its temporary inflation argument.

Meanwhile, in emerging markets, especially in Latin America, interest rates increased substantially until 2021 to curb the increase in inflation.

Exchange rate: price of the dollar in Peru today, Monday, January 31, 2022

The International Monetary Fund said this Monday, January 31, that the timely intervention of monetary policy has kept long-term inflation expectations anchored in Latin America, even when prices grew the most in 15 years in some of the main economies of the region. .

Still, the agency pointed to risks from rising raw material costs, weak currencies and pent-up consumer demand.