Brazil’s real leads gains as central bank keeps hawkish tone


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Brazil’s real spearheaded the gains among its Latin American

peers on Thursday, after its central bank said it would maintain

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tight monetary policy till inflation came within sight of its


The real snapped a three-session losing streak and

gained nearly 1.6% after the central bank held the key interest

rate steady at 13.75%, keeping it unchanged for a second month

in row as it paused its aggressive tightening cycle after 12

consecutive increases that lifted rates from a 2.0% record low

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in March 2021.

Brazil heads into what is turning out to be a close

presidential election run-off between leftist former President

and front-runner Luiz Inacio Lula da Silva and far-right

incumbent Jair Bolsonaro on Sunday, with the former maintaining

his lead.

The real is among the best performing emerging market

currencies this year, up over 5%.

Analysts at UBS Global Wealth Management maintained a

constructive view on the Brazilian real on the back of a

super-orthodox central bank and external accounts in good


Further, Brazil’s Bovespa index

snapped a three-day losing streak

and advanced 1.3% with financial agents making the last

adjustments with an eye on the second round of the election on

Sunday, while analyzing a slew of corporate results.

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The wealth manager sees Brazilian equities retaining

their outperformance against other emerging market peers, driven

by high commodity prices, relatively low vulnerability to

tighter global liquidity, attractive valuations and superior

dividend yields.

Brazil’s central government posted a

better-than-expected primary budget surplus in September

, Treasury data showed, boosted by dividends from the

state-owned oil company Petrobras, which saw its

shares rise 0.8%, and higher tax revenues.

Other emerging market currencies rose

against the dollar, with Mexico’s peso rising 0.5% and

Colombia’s peso jumping 1.3% to a one-week high.

With rising recession fears, investors tend to prefer

currencies that have something physical to hold on to, which

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makes Latin American currencies attractive as the economies have

physical commodities that can sustain economic activity, trade

and food, said Juan Perez, senior currency trader at Monex USA.

Central European currencies were muted to lower after the

European Central Bank raised the benchmark interest rate by 75

basis points. But the euro fell as the analysts noted the

bank sounded less hawkish than expected and struck a dour tone

on economic growth in the euro area.

Argentina’s peso slipped after ratings agency Fitch

on Wednesday downgraded Argentina’s long-term sovereign credit

rating by a notch to ‘CCC-‘ from ‘CCC’, citing deep

macroeconomic imbalances and rising risks over the country’s

ability to meet future debt repayments.

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Egypt’s pound plunged 15% to a record low against the

dollar as authorities announced a $3 billion International

Monetary Fund deal with a commitment to a “durably flexible

exchange rate regime”.

Key Latin American stock indexes and currencies 1928 GMT:

Stock indexes Latest Daily %


MSCI Emerging Markets 859.24 0.87

MSCI LatAm 2214.23 1.16

Brazil Bovespa 114368.05 1.42

Mexico IPC 48934.00 -0.8

Chile IPSA 5188.40 0.71

Argentina MerVal 148050.09 2.083

Colombia COLCAP 1192.18 -0.82

Currencies Latest Daily %


Brazil real 5.2984 1.53

Mexico peso 19.8504 0.38

Chile peso 942.4 0.91

Colombia peso 4809.78 1.28

Peru sol 3.9627 0.18

Argentina peso (interbank) 155.6900 -0.19

Argentina peso (parallel) 287 1.74

(Reporting by Susan Mathew and Ankika Biswas in Bengaluru;

Editing by Bernadette Baum and Andrea Ricci)



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