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Brazil’s real rise in choppy trading; other EM FX mixed on growth worries

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The Brazilian real rose on Monday

after President-elect Luiz Inacio Lula da Silva said fiscal

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responsibility was equally important as spending to improve the

country’s economy, while its regional peers were mixed on growth

worries after COVID-19 flare-ups in China.

After climbing as much as 1.6%, the real was last up

0.3% in volatile trading against the dollar, gaining for the

second straight day.

The currency and the stock index Bovespa have

slumped 2.2% and 5.9%, respectively, this month as investors

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fretted about the state of Brazil’s public accounts after Lula’s

incoming administration proposed exempting some 175 billion

reais ($32.51 billion) from the spending cap on next year’s

budget to pay for welfare programs.

However, the leader of Lula’s Workers Party said in the

lower house on Friday that the transition team could include a

new fiscal framework commitment in a proposed constitutional


“The markets are still in a bit of a wait-and-see mode over

Brazil,” said Rachel Ziemba, founder, Ziemba Insights.

“It’s clear that the market is reluctant to give him the

benefit of the doubt. People are waiting to see exactly what

Lula policy will look like.”

Among other Latin American currencies, Mexico’s peso

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and Chile’s peso were down 0.2%, while Colombia’s peso

climbed 1% even as the prices of their top exports, oil

and copper, dipped on demand concerns from China.

Officials across several Beijing districts urged residents

of areas hit hardest by COVID to stay home, as cases in China’s

capital as well as nationwide ticked higher. With China’s COVID

curbs already dragging on growth, this could further slow

economic recovery.

China’s yuan slipped 0.6%, while MSCI’s index of

emerging market shares dropped 1.4% after a three-week

winning streak.

The safe-haven greenback rebounded 0.8% on Monday

after a sharp fall in recent weeks on hopes of smaller interest

rate hikes by the Federal Reserve.

Among stocks, power company Copel surged 23.6%

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after the Brazilian state of Parana sought to turn the state-run

utility into a firm with dispersed ownership and no controlling


Key Latin American stock indexes and currencies at 1523 GMT:

Stock indexes Latest Daily % change

MSCI Emerging Markets 929.98 -1.38

MSCI LatAm 2156.23 -0.85

Brazil Bovespa 108884.69 0.01

Mexico IPC 51569.72 0.41

Chile IPSA 5271.09 1.43

Argentina MerVal 157253.60 1.285

Colombia COLCAP 1246.03 -2.86

Currencies Latest Daily % change

Brazil real 5.3668 0.13

Mexico peso 19.4680 -0.17

Chile peso 943.1 -0.22

Colombia peso 4948.6 0.72

Peru sol 3.8182 -0.01

Argentina peso (interbank) 163.1700 -0.23

Argentina peso (parallel) 302 1.66

(Reporting by Devik Jain in Bengaluru; Editing by Alex




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