Emerging-Market Currencies Advance as Banxico Intervenes

Emerging-market currencies rose as Mexico’s peso halted a three-day slump after central-bank intervention. Stocks rallied.

In a very volatile session, tMexico’s peso climbed as much as 1.5 percent after Banxico confirmed that it was selling dollars to bolster the exchange-rate from a record low. Gains started to fizzle by mid-morning as some traders deemed the intervention as insufficient to contain the downward pressure. In the afternoon, the peso almost erased the advance after Trump threatened Toyota Motor Corp. with a border tax for planning to build a factory in Mexico.

Currencies

• The MSCI Emerging Markets Currency Index rose 0.9 percent, the strongest advance in more than nine months
• Brazil’s real advanced 0.7 percent extending a rally to its third day
• Argentina’s peso rose on MAE electronic market in Buenos Aires after the nation lifted the last major regulation hindering currency flows, part of a yearlong effort by President Mauricio Macri to revitalize foreign investments

Stocks

• The MSCI Emerging Markets Index was up for a third day, adding 1.2 percent to the highest since Nov. 8
• Brazil’s Ibovespa rose 0.8 percent led by miner Vale and lender Itau 
• Mexico’s IPC index added 0.3 percent and Argentina’s Merval index gained 0.4 percent

What to Watch

• Banxico Sells Dollars to Boost Peso From Low After Trump Slump
• Argentina Ends Currency Rule Seen as Barrier to Stock Investment
• Iron Ore May Be Set to Defy Bears Again in ‘17 as China Buys

Analysis on Mexico

• "It is certainly worth noting that this is the first time we have seen the central bank intervene in the FX market since it announced a discretionary intervention policy last February. In that regard, this is instructive in terms of how Banxico views the recent price action and arguably sends an important message to markets that Banxico is willing to take measures to support the orderly trading of its currency," said Erik Nelson, a currency analyst at Wells Fargo Securities in New York. 
• “We stay bearish on MXN at least into Trump’s inauguration,” Citigroup Inc. strategists Dirk Willer, Kenneth Lam and Fernando Jorge Diaz said in a note to clients. “But this morning’s intervention may undercut the short term momentum for a weaker MXN.”

— With assistance by Richard Frost, Dana El Baltaji, and Xola Potelwa