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EMERGING MARKETS-Latam FX dives, Brazil's real hits 5-month low ahead of rate move

Credit: REUTERS/DADO RUVIC

The Brazilian real touched a five-month low on Wednesday on expectations the country's central bank will leave its policy rate unchanged, while other Latin American currencies sank on uncertainty about the outcome of next week's U.S. elections.

By Shreyashi Sanyal

Oct 28 (Reuters) - The Brazilian real touched a five-month low on Wednesday on expectations the country's central bank will leave its policy rate unchanged, while other Latin American currencies sank on uncertainty about the outcome of next week's U.S. elections.

The real BRBY, BRL= slipped 0.9% to fall for the fourth straight day as Brazil's central bank was seen leaving its benchmark Selic rate at a record low of 2.0% later in the day.

Brazil's currency was among the worst performing emerging market units this year, falling 30%, as fears remained about the country's public finances.

"The extension of the budget deficit in an effort to fight the effects of the pandemic is limiting the central bank's scope to cut rates further," said Melanie Fischinger, FX and emerging markets analyst at Commerzbank.

Most emerging market currencies weakened against the dollar USD= as traders hedged against the possibility of a Democratic sweep in the Nov. 3 U.S. presidential election. Gauges measuring expected swings in foreign exchange markets rose on Wednesday, with one-week contracts that cover the vote reaching their highest levels in nearly seven months.

Surging coronavirus cases also kept risk sentiment at bay, while tumbling oil prices pushed currencies of crude-exporters including Mexico MXN= and Colombia COP= lower. O/R

The Mexican peso tumbled more than 1%, while Colombia's peso slipped 0.7%.

Chile's peso CLP= bucked an eight-day winning streak to fall 0.3%, with local investors focusing on the country's path to reframe its constitution.

Argentina auctioned a dollar-linked bond and other debt for a total of about $3.18 billion on Tuesday, the economy ministry said, as the government looks to ease pressure on the battered peso currency. The country's peso currency ARS=RASL was flat.

The MSCI's index for Latin American stocks .MILA00000PUS tumbled 3.7%, on track for its worst one-day percentage decline in over one month.

Sao Paulo stocks .BVSP tumbled 2.6%, with heavyweight miner Vale VALE3.SA falling 2%.

Santiago stocks .SPIPSA dropped 1.6%, weighed by a 2% decline in shares of Banco Santander-Chile BSANTANDER.SN after it expected to show a fall in quarterly revenue.

Key Latin American stock indexes and currencies at 1354 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1120.70

-1.17

MSCI LatAm .MILA00000PUS

1858.08

-3.69

Brazil Bovespa .BVSP

97259.49

-2.36

Mexico IPC .MXX

37503.57

-1.31

Chile IPSA .SPIPSA

3633.13

-1.73

Argentina MerVal .MERV

0.00

Colombia COLCAP .COLCAP

1151.69

-0.94

Currencies

Latest

Daily % change

Brazil real BRBY

5.7373

-0.97

Mexico peso MXN=D2

21.2656

-1.11

Chile peso CLP=CL

775.4

-0.34

Colombia peso COP=

3839.03

-0.82

Peru sol PEN=PE

3.6097

-0.08

Argentina peso (interbank) ARS=RASL

78.2800

0.04

Argentina peso (parallel) ARSB=

177

7.34

(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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