SAO PAULO: Most Latin American currencies strengthened for a second day on Wednesday as traders bet the Federal Reserve could take longer than expected to increase US interest rates.
Fed Chair Janet Yellen said on Tuesday the US central bank should proceed cautiously in tightening policy.
Many investors had feared she could take a more hawkish tone after a series of Fed policymakers endorsed a trajectory of at least two rate increases this year.
Fed funds futures implied traders now expected the Fed to stand pat until the final quarter of 2016.
Brazilian politics remained under the spotlight after the country's biggest political party split with the governing coalition, sharply raising the chances of President Dilma Rousseff's ouster.
"The chances of impeachment for Rousseff are about 90 percent. One way or another, the game is pretty much up for her," Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management, wrote in a client note.
Many traders believe a change in government could help rekindle investor trust in Latin America's biggest economy. Rousseff's popularity remained close to historic lows, a poll showed on Wednesday.
A central bank decision to sell only some of the reverse currency swaps, which function like buying dollars in futures markets, offered in an auction also helped lift the Brazilian real.
The country's benchmark Bovespa stock index rose, supported by a rise in shares of state-controlled oil company Petroleo Brasileiro SA.
Shares of Gol Linhas Aereas slumped after the airline posted a heavy fourth-quarter loss, weighed by weak demand amid a deep economic crisis and high costs due to a weaker local currency.
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