Latin American currencies outperformed emerging market peers on Friday despite a surging dollar, with all eyes now turning to Chile's presidential election over the weekend.
The Chilean peso lost up to 0.7% before trading flat. The currency hit an 18-month low of 840.5 against the greenback on Thursday and is on course for its worst week since August, breaking a five-week winning streak.
In Sunday's election, hard-right front-runner Jose Antonio Kast and leftist former student protest leader Gabriel Boric are seen heading to a run-off vote in December.
"Sunday's elections will be more about gathering more information to assess how a second round is likely to look like. The election for Congress will also be critical, as it will shape the next president's ability to pass legislation," said Citi strategists in a note.
"Ultimately, we think there will be an opportunity to enter the bullish leg of the election trade. But whether we enter after the first round or into the second round will depend on Sunday's results...The CLP reaction will depend on how much uncertainty is eliminated on Sunday."
Latam FX dips in cautious trade ahead of Fed
Most other currencies in Latin America made small moves higher, faring better than peers elsewhere which still suffered from a lira meltdown overhang. An index of EM currencies was seen logging its worst week in two months, down over 0.3%.
Capitalizing on a sinking euro, meanwhile, the dollar surged 0.6%.
The currencies of Mexico, Brazil and Colombia firmed between 0.2% and 0.4% on hopes of better economic growth.
Colombia's economy is on a path to growing more than 9% this year as business activity rebounds, President Ivan Duque said on Thursday, while his counterpart in Peru expects GDP there to grow 13% and beat expectations in 2021.
Brazil's real was on track to ending the week down about 1.5%, ending three straight weeks of gains.
Argentina's heavily controlled currency was flat.
The International Monetary Fund said on Thursday it is having "frequent" and "strong" discussions with Argentina as the two continue to negotiate a program to replace the failed one agreed in 2018 for which the South American country still owes the fund $45 billion.
Regional stocks followed broader EM peers into the red.
Losses on Sao Paulo's Bovespa stock index were oil stocks, with Petrobras sliding more than 2% tracking crude prices. The company on Friday said it will likely raise its 2022-2026 capital expenditure to $60-70 billion.
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