Colombian peso falls after local interest rate cut; most currencies focus on monthly profits

* Colombia’s c.bank cuts rates by 50 bp * Private economists from Brazil predict two 50 bp increases this year * Chile’s president proposes a 2.7% increase in spending in the 2025 budget * Mexico’s president-elect Sheinbaum will take office on Tuesday * Latam FX loses 0.3%, shares down 1% (updated 15:30 ET/1930 GMT) By Ankika Biswas and Shashwat Chauhan September 30 (Reuters) – Colombian peso fell on Monday after central bank the country opted for a modest interest rate cut, while an index tracking Latin American currencies was on track for its biggest monthly gain in 10 months as metals prices surged. The Colombian peso weakened 0.4% against the dollar after its central bank cut its benchmark interest rate by 50 basis points to 10.25%, a moderate cut in response to local inflation pressures despite international easing in borrowing costs. “Risk premiums have increased in Latin America, with a notable increase in Colombia due to falling oil prices and challenging fiscal conditions, despite interest rate cuts and further cuts expected by the US Fed,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “Heightened geopolitical risk and increased domestic fiscal uncertainty are significant factors preventing a 75 basis point rate cut.” Colombia’s decision followed a 25-basis-point interest rate increase in Brazil and a 25-basis-point rate cut in Mexico this month. The survey found that Brazilian private sector economists now anticipate a tighter interest rate path, with two 50-basis-point increases expected this year and higher borrowing costs next year. The Brazilian real fell 0.4% on the day, but was the leading Latin American currency this month, rising almost 3% against the dollar. Data from Brazil showed that the country’s public sector recorded a larger-than-expected deficit in August due to a mismatch between central government revenues and spending. The MSCI index for Latam currencies achieved its best month since November last year. The stock index fell by 1% on Monday, although quarterly increases were expected. The strength of Latam’s asset classes is driven by optimism around Federal Reserve interest rate cuts and soaring metals prices as China introduces major stimulus measures that have improved the prospects for metals demand. Major copper producers the Chilean peso and the Peruvian sol also posted monthly gains amid a recent surge in prices for the red metal. Chile’s government is proposing an annual budget increase of 2.7% for 2025, President Gabriel Boric said, adding plans to increase pensions, health care and focus on strengthening national security. The Mexican peso rose 0.2% in volatile trading. Future president Claudia Sheinbaum will take office on Tuesday. Meanwhile, Argentine President Javier Milei aims to shake up next year’s mid-term legislative elections as the country grapples with its worst economic crisis in decades. Key Latin American stock indices and currencies: MSCI Emerging Markets 1168.74 -0.49 MSCI LatAm 2237.57 -0.99 Brazil Bovespa 132124.13 -0.46 Mexico IPC 52567.99 -0.4 Chile IPSA 6490.72 -0.61 Argentina Merval 1694669.2 -1.916 7 Colombia AP 1311.64 -0.69 Brazilian real 5.4555 -0.42 Mexican peso 19.6713 0.16 Chilean peso 898.5 0.13 Colombian peso 4194, 89 -0.41 Peruvian sol 3.6923 0.14 Argentine peso (interbank) 968.5 -0.154878678 Argentine peso (concurrent) 1,215 2.469135802 (Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Ed Osmond and Jamie Fred )