Latin American Markets Slip as Warsh's Jackson Hole Debut Looms

Latin American markets took a step back in anticipation of Kevin Warsh's first Jackson Hole speech, where he is expected to address policy tightening. The region's stocks and currencies slipped as investors reevaluated their bets on emerging markets. Argentina's peso hit a new record low, trading at 1,520 per dollar.

The recent strength in emerging markets has been driven by a softer US dollar, which makes it cheaper for global investors to finance positions in riskier assets. However, inflation data released recently showed that US inflation is not cooling as quickly as hoped, leading traders to question how long the Federal Reserve can maintain tight policy.

Macquarie, an Australian financial services firm, believes that Warsh's Jackson Hole debut could be the moment when the US dollar bounces back. A firmer greenback would raise costs for investors who fund or hedge emerging-market bets in dollars, potentially leading to a cutback in leveraged strategies like 'carry trades.'

The impact of a steadier dollar on Latin American risk is a concern for markets. As financing becomes pricier, higher-volatility parts of the region may come under pressure even without fresh local bad news.