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EMERGING MARKETS-Brazil's real recovers from low; still week's worst performer

Credit: REUTERS/PILAR OLIVARES

Brazil's real recovered from a six-month low on Friday as the economy minister vowed he would stay on following an exodus from the Treasury department over plans to boost government spending.

By Ambar Warrick and Susan Mathew

Oct 22 (Reuters) - Brazil's real recovered from a six-month low on Friday as the economy minister vowed he would stay on following an exodus from the Treasury department over plans to boost government spending.

The real BRBY, BRL= was up 0.5%, snapping a four-day losing streak, after having fallen more than 1% in the session. Four senior Treasury officials resigned on Thursday, amid signals that the government would try to increase the constitutional spending cap in order to boost welfare spending.

The real remained the worst performing emerging market (EM) currency this week, set for a loss of 3.2%. But news that Economy Minister Paulo Guedes would remain in place, putting to bed rumors he would resign, and his appointment of a new official helped pare losses.

Brazilian stocks .BVSP were down 1%, having earlier fallen as by more than 4%, and were trading near 11-month lows, while benchmark 10-year bonds BR10YT=RR steadied at three-year lows.

The outlook is still fairly bleak for Brazil's financial markets, said emerging market economist Thomas Mathews at Capital Economics.

"Brazil's debt dynamics are likely to deteriorate significantly over time, perhaps more than is widely expected," he said.

"Minimal real economic growth and an unpopular president looking to shore up support in advance of next year's election suggest, to us, that the risks of further fiscal spending splurges... are likely to remain high."

Most other Latin American currencies firmed as the dollar slipped. Mexico's peso MXN= was the best performer for the day, rising 0.6% as data showed consumer prices rose more than expected in the first half of October. FRX/

The reading saw investors pricing in more hawkish actions by the central bank, which has already hiked rates several times this year.

Chile's peso CLP= inched higher. Chile's president on Friday named central bank chief Mario Marcel to a second term as the country's head monetary policymaker.

Regional stocks traded mixed, tracking a similar session on Wall Street, where the Dow Jones Index .DJI and S&P 500 .SPX declined from record highs after U.S. Federal Reserve Chair Jerome Powell said the bank was "on track" to begin reducing its purchases of assets..N

Mexico's IPC index .MXX fell for a fourth straight session, with broadcaster Televisa TLEVISACPO.MX dropping 3.4% after reporting a 77% drop in net profit for the third quarter.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1293.59

0.05

MSCI LatAm .MILA00000PUS

2155.15

-0.63

Brazil Bovespa .BVSP

106634.46

-1.02

Mexico IPC .MXX

51796.10

-0.43

Chile IPSA .SPIPSA

4084.32

0.76

Argentina MerVal .MERV

87022.31

0.262

Colombia COLCAP .COLCAP

1406.75

-0.24

Currencies

Latest

Daily % change

Brazil real BRBY

5.6417

0.45

Mexico peso MXN=D2

20.1845

0.54

Chile peso CLP=CL

816

0.15

Colombia peso COP=

3771.11

0.20

Peru sol PEN=PE

3.961

-0.50

Argentina peso (interbank) ARS=RASL

99.4000

-0.02

(Reporting by Ambar Warrick; editing by Philippa Fletcher and Rosalba O'Brien)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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