Chile's peso outperforms; Peru's sol drops ahead of elections

Chile's peso outperformed Latin American peers on Monday as prices for the country's top export, copper, rose on supply concerns, while the Peruvian sol fell ahead of final round presidential elections on June 6.

The Chilean peso rose 0.2pc as a strike by a union of remote operations workers at BHP's Escondida and Spence copper mines in Chile disrupted supply.

On the month, however, the currency in on track to mark losses of about 1.7pc with a crackdown in China in the past few weeks after the government's vow to stabilize commodity prices hit copper prices.

Peru's sol fell 0.7pc to 3.8348 per dollar in low volumes owing to a market holiday in United States.

Peru's two presidential candidates, right-wing Keiko Fujimori and socialist Pedro Castillo, are neck-and-neck in opinion polls.

The election could tilt the country, a relative safe haven for investors in Latin America, sharply to the left or see the Fujimori family return to power.

Eyes are also on mid-term elections in Mexico, also on June 6, to see if President Andres Manuel Lopez Obrador's party gets a super majority, an outcome that would leave little opposition to carry out proposed reforms to the detriment of markets.

The Mexican peso fell 0.1pc but was on course for its third straight month of gains.

In Brazil, the real was down 0.1pc at 5.2191 against the dollar. But the currency is up about 4pc this month, among the best monthly performers in May.

"The uncertainty in the pandemic outlook and high fiscal noises still make us estimate the USD/BRL at 5.35 by end-21 and 5.20 by end-22," said strategists at Rabobank in a client note.

Most Latin American currencies are set to mark gains for the month.

"We expect the cyclical (global economic) recovery momentum to persist in the second half of the year, albeit with some bouts of volatility as the (U.S. Federal Reserve) prepares the market for the discussion over tapering bond purchases," said strategists at UBS.

Among stocks, gains in Brazil's Bovespa were led by iron ore miner Vale, which tracked the steel-making ingredient's prices higher.