Chile's peso falls as Brazil's real rises ahead of presidential election

39
2
Chile's peso falls as Brazil's real rises ahead of presidential election

Chile's peso drops 1.3% Peru's sol jumps 1.6%, Brazilian real up 0.4% Updates Prices Ambar Warrick and Susan Mathew Oct 14 Reuters - Brazil's real was supported by the central bank intervention and upbeat economic data on Thursday, while Peru's sol jumped more than 1% in a winning streak spurred by moderate shift in left wing President Pedro Castillo's government. The major Latin American currencies weakened against the dollar after the Fed was fed by the Dollar data to become interested in the beginning tapering. Chile's peso slumped 1.3%, moving closer to five-month lows launched earlier this week. The currency reversed strong session gains made after the central bank hiked rates overnight by a more than - expected 125 basis points to 2.75%, amid rising inflation. Our focus is that Chile's policy rate will likely top in 1 H 22 at 6.00%, but the evolution of idiosyncratic risks will be key to assess how much tightening will be necessary, strategists at Citi said. We think politics will continue as the driver for CLP and expect overall weakness into the election. Chile heads to the polls later on November 9, 2018. On Wednesday, the opposition launched an impeachment proceedings against President Sebastian Pinera after some details in the Pandora Papers leak occurred. Peru's sol hit more than 11 weeks highs, extending gains to a sixth straight session - its longest winning streak since 2019. It has gained about 5.5% in six days. The streak started after Guido Bellido was appointed prime minister, replacing far-right Mirtha Vasquez whose brash style rattled investors. Some less moderate ministers were also replaced by alternate ministers. The moves did not go down well with his party. The ruling Marxist-leaning party Peru Libre has announced on Thursday it will withdraw support for the government in the Congress, which is controlled by the opposition. The sol has slumped around 7.6% for the year, having slumped since the surprise lead and election win for Castillo. It is about 8% away from 2021 peaks hit in early April. In Brazil, real funds rose 0.4%. After selling $1 billion worth of currency swaps in a surprise auction on Wednesday, the bank said it would hold another sale on Thursday, attempting to lift the currency from near six-month lows. Data released in August on Thursday showed Brazil Services Activity grew 16.7% from last year, indicating some resilience in the economy. The Latin American economy and most emerging markets are likely to experience heightened inflation, especially with the rise of energy prices. Minutes from the previous meeting of the Mexican Central Bank showed worries about inflation remaining strongly above target, while Argentina's inflation rate increased to a higher-than-expected 3.5% in September after months of declines. Fitch has affirmed Argentina in junk grade in the 'CCC' area of Fitch.