EM CURRENCIES CLOSE LOWER

MOST EMERGING market (EM) currencies fell on Friday, as the dollar clawed back some lost ground, while Mexico’s peso rose after data showed the economy grew in the third quarter.

MSCI’s index of EM currencies pared almost all its gains for the week, as it fell 0.3% on Friday as the dollar rose 0.2%. The dollar broke a threeday losing streak that was driven by rhetoric from members of the US Federal Reserve as well as minutes of the November meeting that showed the central bank intends to slow its pace of interest rate hikes.

While most EM currencies fell, those of Colombia and Mexico firmed. Data on Friday showed Mexico’s economy grew a less-than-expected 0.9% in the third quarter from the previous three-month period, boosted mainly by the primary sector and despite an ongoing aggressive monetary tightening cycle.

Peru’s sol slipped 0.2% after leftist Peruvian President Pedro Castillo accepted the resignation of his prime minister, Anibal Torres, and said he would reshuffle his cabinet amid a lengthy battle between the executive and legislative branches of the government.

JPMorgan strategists had said earlier this week that potential impact on markets from political risks in Peru would likely prove more limited than in 2021. But they warned that political instability would continue weighing on investment potential, and that regulatory risks remain high.

Brazil’s real led declines in Latam, down 1.6% for its third consecutive weekly decline in the wake of fiscal uncertainty stemming from plans of the incoming government.

Brazil President-elect Luiz Inacio Lula da Silva will give “full priority” to kicking off tax reform early in his administration, close aide and former Sao Paulo mayor Fernando Haddad said on Friday. Brazil’s current account deficit in October came slightly lower than expected.