Peru's sol slides as post-election jitters build

Peru's sol currency fell 1 percent on Tuesday, hit by a combination of post-election uncertainty and a firmer dollar, while neighbouring Chile's peso weakened too as copper prices touched seven-week lows.

Peru is waiting for its next president to be confirmed, with socialist Pedro Castillo clinging to a narrow lead that would tilt the country firmly to the left. That has prompted many urban elites to take money abroad.

The sol currency touched a one-week low against the dollar and has fallen some 8% so far this year, with almost all of its losses made after Catillo's surprise win in the first round vote in April.

Peruvian stocks are down more than 5% this year.

"At this moment the market is still vulnerable to the new rhetoric and policies that are coming from the (potential) new left-wing president," said BCA's chief emerging market strategist Arthur Budaghyan.

"But still there is a very powerful congress in Peru," he said, highlighting that the last two Peruvian presidents had been impeached. "There will certainly be a left-wing bias in (Peruvian politics), but most major policies will probably be blocked."

Peru local currency debt was the worst performer on Monday, with yields rising an average 15 basis points on the day, according to JPMorgan's GBI-EM index.

Metals prices weakened on Tuesday, weighing on Latin American markets. The Chilean peso in particular fell as much as 0.7% to a two-week low after traders and funds cut bets on higher copper prices due to nervousness that top consumer China would move to curb further price rises.

Chile's is the world's top copper producer.

An extension of restrictions to curb the spread of COVID-19 also weighed on sentiment.

Meanwhile the dollar touched a one-month high on the eve of the US Federal Reserve's policy decision.

Investors are seeking clues on whether the Fed has begun discussing tapering bond purchases and if policymakers are concerned about rising inflation, both of which can cause a flight away from emerging markets to safe havens.

Brazil's real meanwhile slipped 0.7%. The country's monetary policy committee Copom is due to release its decision after the Fed on Wednesday. A 75 basis-point hike is expected as inflation is well above the central bank's target.

In Suriname, a majority of bondholders have triggered a termination clause on the South American country's 2023 and 2026 notes, a creditor committee said on Monday.

Suriname's 2026 bond was quoted at 61.5 cents on the dollar, down from 71 at the close on June 1, the day before Suriname's haircut proposal.