SAO PAULO: Most Latin American currencies rose on Monday on growing expectations that the US Federal Reserve would not raise interest rates until next year, but a Brazilian political and economic crisis weighed on the real.
The real closed 0.7 percent weaker after gaining as much as 1.6 percent earlier in the session, with price volatility exacerbated by low trading volumes.
"Liquidity is very thin," said Italo Abucater, a currency specialist with Icap brokerage in Brazil. "Any small dollar purchase is enough to provoke a correction in the exchange rate."
Investors avoided building large positions in the Brazilian foreign exchange market, traders said.
While prospects for Latin America's largest economy continued to get worse, there was no progress in negotiations to bridge a budget gap in 2016. Meanwhile, the government was still struggling to determine the size of this year's unavoidable primary budget deficit.
Other Latin American currencies were modestly stronger, with the Mexican peso gaining 0.4 percent and the Chilean peso rising 0.2 percent, as investors braced for the Fed's interest rate decision on Wednesday.
A series of poor economic data and corporate earnings in the United States increased bets that US policymakers would refrain from increasing interest rates before 2016.
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