Brazilian real up 1pc, weekly rise outperforms Latam FX

Brazil's real rose 1% on Friday and was set for a weekly rise after days of data showed signs of an improving economy, helping the currency outperform other major Latin American currencies, while a weaker dollar also offered support.

The real was headed for its first weekly gain in five as data showed a pick-up in Brazil's services sector last month. Another report showed a record reading on retail sales for August.

Investors, however, worried about Brazil's public finances after the introduction of a new fiscal bill, called Renda Cidada, fanned fears about the government overshooting its spending limit.

FX analysts at Commerzbank said that given the uncertainty about the pandemic's progression and its economic impact, it was unlikely that disagreements about the consolidation of national finances will be resolved soon.

Mexico's peso was on track for its second week of gains after the country's government unveiled an infrastructure investment plan worth nearly $14 billion on Monday.

Latam currencies also got a lift from the dollar, which fell to three-week lows on Friday as optimism that a deal for new US stimulus would be reached, and as investors bet that Democrat Joe Biden is more likely to win the US presidency and offer a larger economic package.

Analysts say a Democratic sweep could also bode well for emerging markets.

"Biden is a much more risk friendly candidate, given his international credentials for multilateralism and predictability and a far less disruptive trade policy," said Alan Ruskin, macro strategist at Deutsche Bank.

The Colombian peso also headed for weekly gains, getting a boost from rising oil prices.

Chile's peso was among the few losers for the week, as it tracked lower prices of copper, its main export, for the week.

Argentina's peso was flat. The country's central bank will lower the benchmark Leliq rate to 37%, from the previous level of 38%, it said on Thursday, while raising the passive repo rate 3 points to 27%, part of a wider interest rate harmonizing push.

The bank said the repo rate increase and alignment of the 'Leliq' rate with Treasury instruments will boost their effectiveness in influencing short-term rates.