Brazil real hits 3-month low as dollar firms after Fed minutes

Brazil's real languished at its lowest level in nearly three months on Wednesday, pressured by a firming dollar on the release of minutes from the US Federal Reserve's recent meeting, while heightening US-China tensions also weighed.

Brazil's real fell as much as 1.3% to 5.53 against the dollar, while stocks in Sao Paulo dropped after their best day in 10-weeks on Tuesday after Economy Minister Paulo Guedes silenced speculation about his departure.

The country has seen a slew of ministerial resignations in the past few months over differences with the administration, increasing political uncertainty and with it doubts about the future of reforms in the country.

"There is a broader debate within political circles about the fiscal stance in 2021 and beyond, with growing calls for the government to break the spending cap which is enshrined in the constitution and limits growth in primary spending to the rate of inflation," said analysts at Capital Economics.

The dollar emerged from 27-month lows after the Fed suggested it could pursue aggressive stimulus measures for longer than under its previous strategy.

Rallying copper prices saw top exporter Chile's peso hit one-week highs. Mexico's peso was flat, while Colombia's currency crept steadily higher from its lowest point in nearly three months. Gains in both were limited by a decline in oil prices.

China's military said on Wednesday the latest US navy sailing near Chinese-claimed Taiwan was "extremely dangerous" and stirring up such trouble was in neither country's interests.

Meanwhile, the White House confirmed that no new high-level talks have been scheduled between the two nations after a scheduled meeting was postponed.

With regional economies already struggling going into the COVID-19 pandemic, an unabated rise in cases in Latam, political uncertainty and US-China tensions leave a bleak outlook for the region.

The Argentine peso slipped as euphoria over a debt restructuring deal faded and focus turned back to the economy: concerns about falling reserves, persistent capital controls and economic recovery after the pandemic, and what that meant longer term about debt sustainability.

Other stock markets in Latin American declined, in line with broader peers with MSCI's index of regional stocks down 1.6%.

Main indexes in the region lost between 0.4% and 1% with Colombian stocks breaking a four-day winning streak.