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Brazilian real, stocks kick off 2023 on a lower note

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The Brazilian real fell in the first

trading session of the year after Luiz Inacio Lula da Silva was

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sworn in as Brazil’s president, while stocks in Latin America’s

largest economy fell with state-run oil company Petrobras

leading losses.

The real fell 1.1% against the dollar in thin trading

on Monday, a federal holiday in the United States.

At his swearing in, Lula delivered a searing indictment of

far-right former leader Jair Bolsonaro, who left Brazil for the

United States on Friday after refusing to concede defeat. Lula

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also vowed a drastic change of course to rescue a nation plagued

by hunger, poverty and racism.

His speech highlighted his vision of a growth-inducing state

and also criticized the spending ceiling and labor reform, said

Guide Investimentos in a note to clients.

Finance Minister Fernando Haddad said Lula’s government will

not accept the “absurd” 220 billion-real ($41.19 billion)

primary deficit forecast in this year’s budget, indicating it

will work to make it smaller.

The real was the best-performing currency in the region in

2022 but gains were limited as concerns about fiscal spending

under the new government offset surging commodity prices.

“We still believe the Fed will remain hawkish, the USD holds

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its safe haven status while transition to a new government will

feed defensive positions,” said analysts at Rabobank in a recent

note.

Sao Paulo’s stocks dropped 3.1%, with financials and

energy stocks weighing on the index.

Brazil’s state-run oil company, Petrobras, slid 5.7% after

Lula signed a decree on Sunday extending for 60 days an

exemption for fuels from federal taxes, a measure passed by his

predecessor aimed at lowering their cost.

Petrobras’ incoming chief executive said on Friday he

planned to tweak the country’s fuel price policy, but said

investors need not worry.

The Mexican peso slipped 0.1% against a firm dollar.

Peru’s sol was subdued after data showed the

country’s inflation rate rose 0.79% in December and reached

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8.46% for 2022, the highest annual measurement in the past 26

years.

Chilean markets were closed on Monday.

Elsewhere in the emerging markets, South Africa’s rand

edged up 0.2%.

In central and eastern Europe, Hungary’s forint

eased slightly, while its peers edged higher as investors

assessed 2023 prospects after a tumultuous 2022 when inflation

soared to double digits, and central banks ramped up interest

rates.

Key Latin American stock indexes and currencies at 1522 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 954.64 -0.18

MSCI LatAm 2074.96 -2.51

Brazil Bovespa 106252.84 -3.17

Mexico IPC 48734.04 0.56

Argentina MerVal 204650.31 1.269

Colombia COLCAP 1281.49 -0.36

Currencies Latest Daily %

change

Brazil real 5.3510 -1.34

Mexico peso 19.5000 -0.13

Colombia peso 4847 0.00

Peru sol 3.805 -0.05

Argentina peso (interbank) 178.0500 -0.51

Argentina peso (parallel) 338 2.37

(Reporting by Bansari Mayur Kamdar in Bengaluru; Additional

reporting by Paula Arend Laier

Editing by Matthew Lewis)

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