Commodities drag down Latin American currencies; Mexican peso top loser

By Ankika Biswas

June 11 (Reuters) –Latin American currencies fell against the dollar on Tuesday, hurt by weak commodity prices and as investors awaited a U.S. monetary policy decision,with Mexico’s peso leading the losses after the country’s president-elect vowed to push aheadwith constitutional reforms.

The Mexican peso MXN= weakened 1% a day after Mexican President-elect Claudia Sheinbaum expressed support for a debate over proposed constitutional reforms that have spooked markets.

Analysts also have attributed the currency’s weakness to the strong gains it enjoyed in 2023 and early this year. The peso rose 15% last year, ranking as one of the top performers among Latin American currencies.

Meanwhile, traders noted that the Argentine peso ARSB= weakened 1.54% to its historic low of 1,300 per dollar in the parallel black market.

The Chilean peso CLP=CL dropped 0.6% to more than a one-month low and Peru’s sol PEN=PE fell 0.5% to near a four-month low, as copper prices in London hit their lowest levels in seven weeks. Chile and Peru are the two biggest producers of the metal.

Chile’s central bank also is expected to lower its key interest rate by 25 basis points to 5.75% next week, a poll of analysts released by the bank showed. That move would follow a 50-basis-point cut in May.

Brazil’s real BRL= was largely muted, as iron ore futures tumbled to two-month lows and data showed the country’s consumer prices accelerated more than expected in May ahead of an interest rate decision next week. Iron ore is one of the South American nation’s key exports.

“This data release closes the door on that (25-basis-point) cut, particularly as it comes alongside increasingly hawkish noises from the central bank,” William Jackson, chief emerging markets economist at Capital Economics, said in a note.

“If the Selic rate isn’t lowered next week, it also becomes hard to see any scope for rate cuts over the remainder of the year,” he said, referring to the central bank’s key policy rate.

The Colombian peso COP= also shed 0.3%, with investors awaiting the country’s consumer prices inflation data later on Tuesday.

The currencies also weakened ahead of the U.S. Federal Reserve’s policy decision on Wednesday, with a series of inflation reports also expected to further shape investors’ views of possible interest rate cuts later this year.

Key Latin American stock indexes and currencies:

Reporting by Ankika Biswas in Bengaluru; Editing by Paul Simao