By Niket Nishant
April 7 (Reuters) – Chile’s peso, the worst-performing Latin American currency since the Middle East conflict began, led losses among regional currencies on Tuesday despite the country posting a wider-than-expected trade surplus in March.
The weakness underscores the extent to which the war, now in its sixth week, has soured sentiment. Dependence on oil imports, combined with broader dollar strength, has weighed on the peso.
The currency fell 0.67% against the U.S. dollar, while an index of regional currencies slipped 0.14%.
Chile posted a trade surplus of $3.06 billion in March, slightly above the $3 billion expected by economists in a Reuters poll.
A trade surplus is generally supportive of a currency as it implies stronger foreign demand for a country’s exports and, in turn, for its currency.
However, the selloff in the peso “seems to be more than a standard risk-off episode”, according to Pantheon Macroeconomics’ chief LatAm economist Andres Abadia.
“It highlights a structural vulnerability to simultaneous oil and USD shocks. Looking ahead, the near-term outlook remains challenging.”
Last month, the country’s central bank left its benchmark interest rate unchanged but warned that higher fuel prices would add to inflationary pressures.
COLOMBIAN PESO GAINS, INVESTORS WARY OF TRUMP THREATS
The Colombian peso, the best-performing currency in the region since March, rose 0.12%. Last week, the central bank raised interest rates despite pushback from the government.
A high-rate environment is often positive for a currency because it can encourage capital inflows into domestic bonds and other assets. However, the spat with the government could be a challenge.
“Markets read this as a credibility shock, prompting a repricing of institutional strength,” Abadia wrote.
Brazil’s real and Argentina’s peso also dipped 0.59% and 0.07%, respectively.
Sentiment toward regional assets remains highly sensitive to headlines from the Middle East.
With the deadline set by U.S. President Donald Trump for Iran to reach a deal fast approaching, investors are treading cautiously, especially as rhetoric between the two sides grows increasingly caustic.
“A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will,” Trump posted on Truth Social.
An MSCI index tracking Latin American equities fell 0.57%, on course for its third consecutive session of losses.
Elsewhere in the emerging market universe, the Indonesian rupiah breached the 17,100 level against the dollar for the first time, defying the central bank’s efforts to prop it up, as energy shocks and lingering fiscal and governance concerns chased foreign investors away.
Key Latin American stock indexes and currencies:
Equities
Latest Daily %
change
MSCI Emerging Markets 1458.73 0.6
MSCI LatAm 3098.29 -1.29
Brazil Bovespa 186037.55 -1.13
Mexico IPC 69018.2 0.05
Chile IPSA 10531.09 -1.53
Argentina Merval 2984742.21 -0.715
Colombia COLCAP 2291.44 -0.4
Currencies
Latest Daily %
change
Brazil real 5.1695 -0.59
Mexico peso 17.746 0.02
Chile peso 923.61 -0.67
Colombia peso 3672.68 0.12
Peru sol 3.4223 -0.04
Argentina peso (interbank) 1395 -0.07
Argentina peso (parallel) 1390 1.08
(Reporting by Niket Nishant in Bengaluru; Editing by Janane Venkatraman)
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