Latam currencies fall, Mexican peso snaps four-day winning streak

Latin American currencies turned lower on Tuesday, with Mexico's peso falling for the first time in five sessions following a strong start to the week fueled by the country's new infrastructure investment plan.

The real fell 0.6%, after rising about 0.8% in the session, while the Mexican peso fell 1%. Currencies in Latin America started the week stronger following improving services sector data from Brazil and Mexico's unveiling of an almost $14 billion infrastructure plan.

Analysts say the fourth quarter will be volatile for currencies in the region due to continued fears about Brazil's public finances and the impact of the Nov. 3 US presidential election on Mexico.

Brazil's real is among the worst-performing emerging market currencies this year, down nearly 30%, while the Mexican peso has fared somewhat better as Mexico's main trading partner, the United States, has shown signs of an economic rebound.

The International Monetary Fund on Monday revised its 2020 economic outlook for Brazil higher, but warned that risks remain "exceptionally high and multifaceted" and government debt is on course to end the year at around 100% of gross domestic product.

However, supporting sentiment in Brazil, Economy Minister Paulo Guedes and Rodrigo Maia, the speaker of the country's lower house of Congress, left a dinner with other officials on Monday promising to return to work together on the government's economic agenda.

"They reinforced the need to comply with the spending cap and to accelerate the approval of reforms, in line with Guedes' wishes," emerging markets and FX strategists at Citigroup noted, though they added they remained skeptical of the positive outcomes and say public spending will surpass the limit in 2021.

Amid doubts about Brazil's fiscal health, the new aid program proposed by President Jair Bolsonaro's government has been one of the most recent points of friction between Guedes and Congress.

The MSCI's index for Latin American currencies fell 0.3%.

Stocks on Wall Street sold off, while the dollar fell after US President Donald Trump called off negotiations with Democratic lawmakers on coronavirus relief legislation until after the election.

In Argentina, the country is looking to tempt wary investors with a dollar-linked bond being auctioned on Tuesday. The country is struggling with a domestic currency crisis, stringent capital controls and tumbling foreign reserves.