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EMERGING MARKETS-Chile's peso falls after referendum; Latam FX hit by strong dollar

Credit: REUTERS/MURAD SEZER

Chile's peso fell on Monday as uncertainty grew following a landmark vote to replace the country's constitution with a new charter drafted by its citizens, while other major Latin American currencies slipped against a firmer U.S. dollar.

By Shreyashi Sanyal

Oct 26 (Reuters) - Chile's peso fell on Monday as uncertainty grew following a landmark vote to replace the country's constitution with a new charter drafted by its citizens, while other major Latin American currencies slipped against a firmer U.S. dollar.

Millions of Chileans voters gave a ringing endorsement to a plan to tear up the country's Pinochet-era constitution on Sunday night after large and violent social protests last year sparked demand for a new charter.

The Chilean peso CLP= snapped a six-day winning streak to fall 0.6%, as analysts feared the rewriting of the constitution may cause the central bank to adopt a more dovish stance in the medium term.

"The road ahead is full of uncertainties and rewriting the constitution will be a complex process," said Nikhil Sanghani, Latin America economist at Capital Economics.

Sanghani noted the state looked set to play a bigger role in the economy, which while reducing savings and income inequality may help boost aggregate demand, could lead to a misallocation of resources and weaker fiscal discipline.

Other currencies in Latin America were hurt by a rise in the safe-haven dollar =USD after coronavirus cases surged in Europe and the United States, while investors awaited central bank decisions from major economies in the region through the week. FRX/

Brazil's real BRBY, BRL= weakened 0.1%, with focus on a central bank policy meeting later this week. The bank is widely expected to keep the Selic rate on hold at a record low 2.00%.

A central bank survey showed Brazil's 2020 inflation outlook rose to 3%, the 11th week in a row it has risen as a recent spike in food prices continues to intensify short-term inflation pressures.

The Mexican peso MXN= slipped 0.4% as data showed Mexico's economy grew more slowly than expected in August from July as a recovery from the coronavirus pandemic lost steam.

Colombia's peso COP= mirrored a fall in oil prices, while local investors awaited a central bank policy meeting on Friday.

A Reuters poll of analysts said Colombia's central bank will hold the benchmark interest rate steady, ending seven consecutive months of cuts which took borrowing costs to a historic low.

Stocks in Latin America were lower, with Chilean .SPIPSA and Mexican equities .MXX leading declines.

Key Latin American stock indexes and currencies at 1515 GMT:

Stock

indexes

Latest

Daily % change

MSCI Emerging Markets

.MSCIEF

1129.77

-0.59

MSCI LatAm

.MILA00000PUS

1954.70

-0.67

Brazil Bovespa .BVSP

101396.49

0.14

Mexico IPC .MXX

38367.02

-0.88

Chile IPSA .SPIPSA

3778.16

-0.78

Argentina MerVal .MERV

51828.99

-1.302

Colombia COLCAP .COLCAP

1165.27

-0.86

Currencies

Latest

Daily % change

Brazil real BRBY

5.6290

-0.04

Mexico peso MXN=D2

20.9970

-0.61

Chile peso CLP=CL

776.9

-0.55

Colombia peso

COP=

3813.21

-0.67

Peru sol PEN=PE

3.6027

-0.16

Argentina peso (interbank)

ARS=RASL

78.2000

-0.09

Argentina peso (parallel)

ARSB=

190

2.63

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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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