The president of the United States Federal Reserve (Fed), Jerome Powellsaid on Friday that “the time has come” to begin reducing the interest ratesa more moderate message than many investors had thought they would hear at the central bank’s annual conference in Jackson Hole, Wyoming.
The process, which will likely begin next month with a 25 basis point cut at the monetary policy meeting of the Fed on September 17-18, will keep investors focused on economic data over the next few months as they assess whether the narrative of “soft landing” of the US economy may continue.
The dollar, global bonds and investments in Uruguay will see the effects of the beginning of monetary policy easing in the world’s largest economy.
Dollar
So far this year, the dollar has managed to appreciate 3.15% in the Uruguayan exchange market. Although its price does not depend on a single factor, the reduction in the Fed directly impacts on the global dollarweakening it, which also has an effect on the local market.
The scenario that can be expected for the coming months is that of the dollar cutting the appreciation which has been achieved in the last 90 days, which has consolidated it within the 40 pesos range.
The return of large investments to Uruguaya process that has slowed this year.
Investments
Uruguay, with the lowest country risk in the region, is an interesting option for investors who, in search of higher returns in the face of falling reference rates in the United States, are looking again at emerging markets.
This, as has happened in the past, will impact the Uruguayan peso, strengthening it.
Global Bonds
When the Fed If the announced cut is finally carried out, the rates on the American bond curve will tend to fall, as would the yield curve. Uruguay in dollars, so global bond prices in that currency will rise.
A drop in risk-free rates and a weak dollar at a global level will stimulate demand for securities from emerging countries in local currency, with those from Latin Americainfluenced by the titles in Uruguayan pesos.
Source: Ambito
