EMERGING MARKETS-Chile's peso falls after referendum; Latam FX hit by strong 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:
Daily % change
MSCI Emerging Markets
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Peru sol PEN=PE
Argentina peso (interbank)
Argentina peso (parallel)
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum)
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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