Yen crash to 40-year low drives LatAm selloff, Brazil bears brunt
A historic plunge in the yen is fuelling a flight into the dollar that threatens to overwhelm higher oil prices and drag Latin American equities lower.
Latin American markets are poised for a defensive open as the yen’s collapse to a 40-year low triggers a broad flight into the dollar, threatening to overpower a supportive rally in crude oil.
The Japanese currency crashed through 162 per dollar overnight, forcing a sharp rotation out of emerging markets and into US Treasuries. The resulting strength in the greenback is compounding pressure from falling US equity futures, with the Nasdaq pointing to a 0.7% drop and the S&P 500 down 0.4%.
Brazil is absorbing the brunt of the regional pain. The Ibovespa closed Thursday down 1.24% at 173,825, leaving it 12.5% below its 52-week high after breaching the 175,000 support level. Futures signal a third consecutive day of declines, while the real slipped 0.44% to 5.1013.
The only counterweight is energy. Brent crude climbed 0.7% to US$84.83 on Middle East tensions, providing a fundamental bid for oil majors like Petrobras. Thursday’s turnover on the B3 reflected this narrow safety trade, with Petrobras and Vale handling R$816 million and R$945 million respectively.
Outside of the commodity complex, rate-sensitive domestic cyclicals suffered heavily. Names like MDNE3, BRKM5, and CURY3 dropped between 4.4% and 5.5% under the weight of Brazil’s punishing 15% Selic rate.
Investors are now looking to two key domestic data releases before the bell: the IGP-10 inflation index and the IBC-Br activity gauge. A weak IBC-Br print could accelerate bets on interest rate cuts from the central bank, potentially supporting equities even as it pressures the currency. The broader regional outlook, however, hinges on whether afternoon US data can stabilise the dollar.
