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EMERGING MARKETS-Latam FX muted, Brazil real falls to near one-month low

Credit: REUTERS/RICARDO MORAES

Latin American currencies traded in tight spaces by Tuesday afternoon, ahead of next week's U.S. presidential election, while Brazil's real fell for the third straight day.

By Shreyashi Sanyal

Oct 27 (Reuters) - Latin American currencies traded in tight spaces by Tuesday afternoon, ahead of next week's U.S. presidential election, while Brazil's real fell for the third straight day.

The real BRBY, BRL= fell 1% to touch its lowest level in 25 days, pushing the MSCI's index for Latin American currencies .MILA00000CUS 0.6% lower.

Worries about the Brazilian government's ability to fund a new fiscal program have persisted despite a reassuring tone from the country's Economy Minister Paulo Guedes.

Investors also awaited a policy meeting of Brazil's central bank's rate-setting committee, Copom, on Wednesday. The bank is expected to leave its benchmark Selic rate on hold at a record low of 2.00%.

"Tomorrow's monetary policy meeting was not supposed to be an especially newsworthy event. But with investors eagerly anticipating material changes in the policy guidance, including a larger-than-50% chance of a 25-basis-points increase in the policy rate at the December policy meeting," said Gustavo Rangel, chief Latin America economist at ING.

Latin American currencies started the week on the back foot on Monday, but Chile's peso CLP= rose 0.4%, extending its winning streak to an eighth day.

Higher copper prices on Tuesday helped support Chile's currency, although the focus remained on the country's beginning the long process of drafting a new constitution after a vote in favor of the project by citizens.

In Sunday's referendum, 78% of voters in the world's top copper producer backed constitutional overhaul, a stinging rebuke of the constitution dating from the 1973-1990 dictatorship of Augusto Pinochet.

"There is the hope that this vote will mark the end of the protests and violence that has plagued the country for the past year and leaves the focus firmly fixed on broader external drivers in the short-term, such as the looming U.S. election," said Natalie Rivett, senior emerging market analyst.

The U.S. dollar =USD weakened against a basket of currencies ahead of the U.S. elections in the coming week, while fears remained of a second wave of coronavirus infections. FRX/

"A Biden victory and/or 'blue wave' is considered mostly positive for EM assets," IGM's Rivett said.

Mexico's peso MXN= fell 0.1% against the dollar, with figures showing the country's trade surplus with the rest of the world shrank in September as imports picked up faster than exports during a burgeoning recovery from the coronavirus pandemic.

The Colombian peso COP= edged 0.2% higher as oil prices LCOc1CLc1 regained some lost ground, while the focus remained on the country's central bank meeting later in the week.

The Argentine peso ARS=RASL edged lower. The country could request more money from the International Monetary Fund (IMF) as part of the talks to renegotiate its 2018 standby agreement, an IMF official in Argentina said.

Key Latin American stock indexes and currencies at 1917 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1132.77

0.19

MSCI LatAm .MILA00000PUS

1920.25

-1.74

Brazil Bovespa .BVSP

99539.38

-1.46

Mexico IPC .MXX

38008.35

-0.62

Chile IPSA .SPIPSA

3697.24

-0.24

Argentina MerVal .MERV

47500.05

-4.227

Colombia COLCAP .COLCAP

1164.18

-1.1

Currencies

Latest

Daily % change

Brazil real BRBY

5.6742

-1.12

Mexico peso MXN=D2

20.9437

-0.14

Chile peso CLP=CL

772.3

0.35

Colombia peso COP=

3807.6

0.14

Peru sol PEN=PE

3.6068

-0.08

Argentina peso (interbank) ARS=RASL

78.3000

-0.05

Argentina peso (parallel) ARSB=

177

7.34

(Reporting by Shreyashi Sanyal in Bengaluru Editing by Marguerita Choy and Jonathan Oatis)

((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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