Latam's oil-linked currencies rise, Brazilian real abandons gains

Currencies of oil-exporters Mexico and Colombia rose on Wednesday on the back of higher crude prices, while Brazil's real gave back early gains as investors continued to worry about the country's public finances.

The Mexican peso gained 0.3%, while Colombia's peso added 0.6% after crude prices rose as the dollar weakened and global equities rose.

The US dollar gave back gains it made on cautious trading amid diminishing hopes for a COVID-19 vaccine or US fiscal stimulus.

Global risk sentiment had been shaken after two separate high-profile coronavirus vaccine trials by Johnson & Johnson and Eli Lilly were halted.

"While hurdles like these should be expected, investors react sensitively to such news, especially now when many parts of the world are facing a sharp increase in COVID-19 cases," said Milan Cutkovic, market analyst at Axi.

Brazil's real turned lower by midday trading as investors grew doubtful of the government's ability to fund a new fiscal package without overshooting its spending ceiling.

Latin America's largest economy has, however, benefited from strengthening demand from China, which is one of its biggest trading partners.

"The rapid post-pandemic policy response combined with exposure to Chinese demand for industrial commodities have fueled an early economic recovery (in Brazil) compared with many EM peers," strategists at MRB Partners said.

Most emerging markets have been struggling to control the spread of the coronavirus, slowing the pace of recovery in these regions. The International Monetary Fund warned on Tuesday of a worsening outlook for EM markets.

Chile's peso extended declines to the third day, to fall 0.2%, despite rising copper prices.

Supervisors at Chile's Escondida mine and mine operator BHP decided on Tuesday to extend negotiations over a labor contract for another day in a last-ditch attempt to stave off a strike at the world's largest copper deposit.

Data showed Argentina consumer prices rose 2.8% in September versus a month earlier, just above forecasts. Meanwhile, President Alberto Fernandez said Argentina will not devalue its currency or seize bank deposits despite a financial crisis compounded by the COVID-19 pandemic. Argentina's peso continued to weaken.

The MSCI's index for Latin American stocks rose 0.6%, with Sao Paulo stocks leading the advance as heavyweights Petrobras and Vale gained.