SAO PAULO: Latin American currencies weakened on Wednesday on the outlook for higher US interest rates, with Brazil's real falling to its lowest in nearly two months on concern about the progress of a recent budget-tightening initiative.
Equities were little-changed across the region, with the broad MSCI Latin American stock index trading nearly flat.
With few major economic indicators on Wednesday, traders continued to trade on the outlook for US interest rates. Recent encouraging data from the world's largest economy and comments from Federal Reserve chief Janet Yellen on Friday have contributed to a widespread perception the Fed will not put off an interest rate increase until next year, as some investors had been expecting.
A US interest rate rise tends to make higher-yielding but riskier Latin American securities less attractive, weighing on the region's currencies.
The Mexican and Chilean pesos both eased, while Brazil's real weakened as low as 3.185 per dollar before beating back part of those losses in the afternoon.
Traders including Luciano Copi at Curitiba-based brokerage Correparti said the real would continue to see pressure for the time being as the government wrangles with Congress over the extent of spending cuts that are critical to warding off a sovereign credit downgrade.
Equities markets were mostly higher, but the moves were small. Brazil's Bovespa stock index made up part of the previous session's losses, driven by bank shares, which had declined sharply in recent sessions on concerns over changes to income tax rules.
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