Brazil's real lowest as political uncertainty intensifies

C.Suisse sees Brazil Selic Rate ending 2021 at 8.25% Petrobras surges after Q 2 earnings top estimates Chile's Francke aims for fiscal deficit over 5.4% of GDP Foreign miners in Brazil warn lawmakers over royalties by Susan Mathew and Ambar Warrick Aug 5 - Political uncertainty dragged Brazil's real lowest on Thursday despite an initial central bank boost, while shares of the oil major Petrobras rose more than 8% on strong quarterly results. The real was 0.7% after hundreds of business leaders published a letter in an apparent rebuke to President Jair Bolsonaro's recent threats to the 2022 elections. Bolsonaro also threatened to respond in front of a Supreme Court investigation into his conduct and hit out within the limit of the constitution, move that can have serious effects on Latin America's largest economy. As discontent over the administration of Brazil and a series of corruption scandals clouded the outlook for Brazilian assets this year despite a pickup in economic growth. The real initially had taken support from the central bank's latest plan to hike rates by 100 basis points to 5.25%. A Reuters poll shows the currency will hold on to these levels in the coming months. We are following our expectation of one hike of 100 basis points in September followed by two consecutive hikes of 50 basis points increasing the Selic interest rate to 8.25% by 2021, said Credit Suisse analysts Solange Srour and Lucas Vilela. Political uncertainty has pulled the Bovespa stocks index off its early gains. Mais Petrobras was the best day of Petrobras in more than five months after beating third quarter profit estimates due to higher Brent prices, strong natural gas sales and relatively controlled expenses. Most other stock benchmarks tracked Wall Street, which was later lifted by lower weekly U.S. jobless claims in upper trading sectors. MSCI's index of Latam stocks fell 0.1%, but fared better than a broader index of emerging market stocks that was dented by hawkish comments from a Top Federal Reserve Official on Wednesday. Gains in the Peru's sol were hampered by a dip in copper prices. The newly appointed moderate Finance Minister Pedro Francke said on Wednesday that he hopes to raise Peru's fiscal deficit for 2021 below the previously established limit of 5.4% of GDP, even as a new administration pushes to reduce spending. Copper exporter Chile's peso plunged 0.7% toward October lows. Foreign miners asked lawmakers to rewrite a bill that would slap royalties on their sales, saying it could damage their competitiveness and investment plans.