EMERGING MARKKETS-Chile’s Peso, Peruvian Sol lead Latam FX Lower

(Adds comments, prices updates throughout) By Shreyashi Sanyal Jan 13 (Reuters). Chile’s peso eased Friday, following soft copper prices. The Peruvian sol fell in the aftermath violent protests. However, there are increasing hopes for smaller U.S. Federal Reserve rate hikes. After a sharp rally this week, the peso fell 0.5% against the greenback. This was due to red metal prices, which Chile is a major producer. The Latin American currencies gained 2.8% this week, and are on track to record their second week in gains. This is a positive start to 2023 and January. The benchmark interest rate for Peru was raised by 25 basis points on Thursday to 7.75% by the central bank. This comes as the country faces the most severe inflation since the 1930s. Mario Guerrero from Scotiabank, Peru’s deputy head economist, said, “Though inflation has already begun to show signs of slowing it has not been without conviction. The central bank will strive to ensure that inflation returns into the target range.” After weeks of bloody clashes that resulted in the deposing of former President Pedro Castillo, many took to the streets of Lima to demonstrate their disapproval of the new government. At least 42 people were killed. William Jackson, Capital Economics’ chief emerging markets economist, said in a note that protests could cause inflation to rise further in the near term. “Peru has been one the fastest-growing economies in the region for the past few decades. But it’s difficult to see that trend continuing.” So far, the sol has risen 0.3% compared to Latin American currencies that have gained nearly 3% each. A senior official from the central bank said that Peru’s economy probably grew slightly less last year than 2.9%. This could be due in part to the December social unrest, which caused the economy to shrink. The Brazilian real was flat against the US dollar. Data from Brazil showed that economic activity declined more than anticipated in November, the fourth consecutive month of contraction. The shares of Petrobras, the state-owned oil company in Brazil, fell by more than 1%. According to the company’s statement, Jean Paul Prates was officially appointed chief executive officer by the government. The Colombian peso fell 0.1% Friday and has gained 3.5% this week. The year has started with a bang for emerging market bonds. Investors are happy to invest in riskier debts as they believe that global interest rates will rise. Indexes and currencies of Latin America. 1918 GMT. Stock indexes. % change MSCI Emerging Markets 1030.79 1.23 MSCI LatAm 295.83.36 0.47 Chile IPSA 55157.40 -1.05 Argentina MerVal 241430.38 3.108 Colombia COLCAP 1331.32 0.4 Currencies. % Change Brazil Real 5.0947 0.08 Mexico Peso 8.7438 0.44 Chile 825.9 -1.03 Colombia Peso 4684. Sharon Singleton, Alistair Bell and Shreyashi Sanyal in Bengaluru edited.