Aurelia Butler

The Andean country’s interest rate has climbed steadily since the middle of last year when it was at a floor of 0.25% as the world’s no. 2 copper producer has rebounded from the impact of the coronavirus pandemic and inflation has started to bite.Peru’s 12-month inflation rate stood at 6.82% in March, the highest in a quarter of a century, pushed up by higher food and fuel prices as well as a weakening sol currency versus the U.S. dollar. The central bank’s inflation target is from 1% to 3%.The government earlier on Thursday ordered its armed forces to supervise the country’s highways for the next month, amid crippling protests nationwide over rising food and fuel prices.The South American country has been beset by road blockades for over a week as anger has flared over rising costs, which have spiked since the Russian invasion of Ukraine. (Graphic: Peru interest rate – https://graphics.reuters.com/PERU-ECONOMY/klvykjoabvg/chart.png) More

TOKYO (Reuters) – Japan’s current account balance swung back into the black in February from its second-biggest deficit on record in the previous month, providing some respite for policymakers amid a deterioration in economic fundamentals.Soaring fuel costs and a weak yen have expanded Japan’s trade deficit in recent months, more than offsetting heavy returns on investment and pushing the country’s current account balance into the red.The world’s third-largest economy ran a current account surplus of 1.6483 trillion yen ($13.28 billion) in February, finance ministry data showed on Friday, against a median market forecast for a 1.4368 trillion yen surplus.That followed a 1.1887 trillion yen deficit in January, the second biggest shortfall under comparable data dating back to 1985.The trade deficit narrowed to 176.8 billion yen in February from 1.6043 trillion yen in January.The primary income surplus, meanwhile, widened to 2.2745 trillion yen from 1.2813 trillion yen, although that was smaller than in the same month last year due to shrinking foreign investment returns, the data showed.The smaller trade gap and larger primary income surplus helped push the current account back into positive territory.Japan is particularly vulnerable to soaring fuel and raw material costs, as it relies almost entirely on imports for energy, adding to uncertainties about its already fragile recovery from the pandemic.Some analysts have warned that Japan’s worsening terms of trade and current account balance, if they persist, could erode market trust in the country’s ability to pay back debt and work to weaken the yen further. More

JOHANNESBURG/BENGALURU (Reuters) – Most emerging market currencies will continue to struggle against the mighty dollar over the coming year as the U.S. Federal Reserve finally delivers expected aggressive policy tightening, according to a Reuters poll of FX strategists.Central banks in emerging market economies have been bracing for this for months by hiking their benchmark interest rates. But the actual moment when the Fed delivers half-point rate increases and rapid balance sheet reduction still matters.Minutes from the Fed’s March meeting showed officials had generally agreed to trim the central bank’s balance sheet by $95 billion a month, providing a major boost to the greenback which was already riding high.The latest Reuters poll of over 50 currency strategists showed nearly all developing market currencies would weaken over the coming 12 months. Even currencies which have been dragged higher by the ongoing commodity cycle and their respective central banks’ policy tightening, like the Brazilian real and the South African rand, were forecast to give up about half of those gains in a year.These currencies have gained about 18% and 9% respectively so far in 2022.The Mexican peso – a classic emerging market foreign exchange hedge — is expected to lose more than three times its gains for this year in 12 months.”In the face of imminent sharp Fed hikes and with U.S. yields moving rapidly higher, the resilience of EMFX remains somewhat surprising,” noted Paul Meggyesi, head of FX strategy at JPMorgan (NYSE:JPM).”A particular risk to EMFX is that as the Fed starts to deliver rate hikes, further upside in U.S. yields could be primarily driven more by real yields than breakeven inflation”Meggyesi added this has historically been negative for emerging market currencies.While most emerging market currencies have managed to escape the onslaught of the Fed’s policy tightening relatively unscathed, the Russian rouble and the Turkish lira were notable exceptions.The rouble, which fell by half in the past month and hit an all-time low of 150 per dollar after Russia’s invasion of Ukraine, was expected to weaken over 15% to 94.2 per dollar in a year from 78.5 presently.The Russian currency is driven by export-focused companies selling foreign currency and low activity of importers. But analysts warned the recent rouble rally won’t last.”(The recent gain) is not the true reflection of the fundamental situation in Russia. The economy is expected to contract very sharply and inflation is going to become more elevated, which over the longer term should be more consistent with a weaker rouble,” said Lee Hardman, currency analyst at MUFG.Hardman said the situation for the Turkish lira wasn’t very different.”They (the government) are intervening to support the lira but they’re not going down the kind of draconian measures like capital controls we see in Russia.”The lira, which weakened 44% last year, was forecast to plunge another 15% to 17.27 per dollar in a year as it grapples with rampant inflation that hit a 20-year high of 61.14% in March.China’s tightly controlled yuan was predicted to depreciate 1.4% to 6.45 per dollar in a year as analysts warned that a shrinking yield gap between Chinese and U.S. 10-year government bonds could trigger capital outflows.Elsewhere in Asia, the Philippine peso and the Indian rupee were set to weaken between 1%-3%. More

SAN LUIS POTOSI, Mexico (Reuters) -A top U.S. labor official commended Mexico for progress in implementing a labor reform that is key to a new trade deal, but flagged a “tremendous” amount of work ahead and the need for financing and staffing to implement the law. The reform underpins the United States-Mexico-Canada Agreement (USMCA) that took effect two years ago. The law is meant to resolve labor disputes more swiftly and to help Mexican workers achieve better pay after years of stagnant salaries.”The amount of work that needs to be done is tremendous,” U.S. Deputy Secretary of Labor Julie Su told Reuters in an interview on Wednesday in the central city of San Luis Potosi, one of Mexico’s top automaking hubs.On her first international trip in her role, Su met with workers, business leaders and local government officials.”There’s a broad recognition that this is going to require resources to do right,” she said.The labor reform was signed into law in 2019. All of Mexico’s 31 states as well as the federal capital Mexico City were scheduled to implement changes to their labor justice systems by May 2022.However, Mexico’s Labor Ministry requested a five-month extension for the last dozen states due to budget and scheduling limitations.Still, Su said Mexican officials had made “good progress,” citing the creation of a federal agency meant to process worker disputes quickly and to oversee votes to ratify union contracts.She also noted that officials at both the local and federal levels had ramped up hiring and training, and planned to do more. “We are … watching to see that the rest of the commitments also come through,” she said.Su also called on U.S. companies to model good behavior in Mexico. General Motors (NYSE:GM) faced scrutiny under USMCA mechanisms last year for worker rights violations, as did U.S. company Cardone over allegations of abuses at its auto parts plant Tridonex.Both companies said they were committed to respecting worker rights.”We hope there will be leadership also from American companies to support the USMCA commitments and to help create a culture in which there is broader recognition that what’s good for workers is good for business,” Su said. Several workers from the San Luis Potosi plant of industrial giant 3M Co, in a meeting with Su, asked her team to keep monitoring U.S. companies in Mexico, especially as a group of 3M workers begin the task of forming an independent union.”We recognize the importance of keeping an eye on making sure the promises in the laws, the promises in the USMCA … are actually realized,” Su replied. 3M said it is committed to providing a safe work environment with competitive salaries and respects the right of workers to organize. More

Macro hedge funds, which bet on macroeconomics trends, rose 7.7% in the quarter, according to a macro fund index, helped by skyrocketing commodities prices, rising interest rates and inflation. “The combination of these two powerful market dynamics of inflation/interest rates and historic geopolitical risk has contributed to massive dislocations across commodity, equity, and fixed income markets and unprecedented macro and geopolitical uncertainty, with managers navigating tremendous and fluid volatility,” said Kenneth J. Heinz, President of HFR.In the last two quarters of 2021, hedge funds posted losses, but still ended the year in a positive note, with gains of 7.7%. Overall, hedge funds ended the first quarter of this year 0.30% down, the HFRI Fund Weighted Composite Index showed, outperforming the S&P index, which declined 4.60%, the report showed.Both equity hedge and event-driven funds indexes posted losses in the first quarter. More