(Updates with closures)
By Nelson Bocanegra
BOGOTÁ, Feb 21 (Reuters) – Latin American markets closed lower on Tuesday, a day before the release of U.S. Federal Reserve minutes, while markets in Brazil and Argentina remained inactive due to the celebration of carnivals.
* The dollar index rose against a basket of currencies, after the release of several encouraging economic data on US activity, which suggested the Federal Reserve would keep interest rates higher for longer.
* Precisely, the minutes of the central bank of the United States which will be known Wednesday will be determining in the middle of the concern of the investors on the prospects of the rates.
* “The rally in global equities at the start of the year appears to have run out of steam and the dollar is resuming its gains after central bankers reaffirmed their desire to fight inflation,” said a note from the brokerage Acciones y Values.
“That, and a stubborn price trend (inflation), has led traders to factor in an additional 75 basis points of Fed rate hikes through July. Traders are also reducing their bets on rate cuts to the end of 2023. The Fed is not indicating that they will do anything different from what they have always said, but before, the markets did not believe them,” he added.
* The falls were led by the Colombian peso, which closed with a 1.17% drop to 4,959.25 units to the dollar – the lowest level since Jan. 5 – affected by both caution and the nervousness of agents around the program of economic and social reforms planned by President Gustavo Petro.
* “Although the outlook for risky assets has deteriorated, the idiosyncratic context has printed an additional risk premium, mainly in Colombia,” said a note from Banco de Bogotá.
* “This is a reflection of the socio-political changes occurring with the reform agenda, which although not fully known, the points highlighted have generated uncertainty exacerbated by the scale and scope of these “, he added.
* The Chilean peso erased its early gains and closed the session 0.75% lower at 801.50/801.50 units to the dollar. At the same time, the main index of the Santiago Stock Exchange, the IPSA, fell by 1.3%, to 5,261.37 points.
* The Mexican peso fell 0.46% to 18.4538 units to the dollar, while the main S&P/BMV CPI stock index fell 1.25% to 53,236.09 points.
* The Peruvian currency, the sol, recovered 0.38% to 3.8091 units to the dollar and the benchmark index of the Lima Stock Exchange lost 0.28% to 573.06 points. (Reporting by Nelson Bocanegra, additional reporting by Froilán Romero in Santiago, editing by Manuel Farías)