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BRASILLIA: The Brazilian real slid more than 1% on Friday, heading for its third weekly decline after prices of iron fell on fears of slowing demand from China, while Chile’s peso found its footing after the country’s central bank raised interest rates.

Overarching worries of a slowdown in China due to rapidly rising COVID-19 cases amid the US Federal Reserve’s aggressive tightening cycle have made emerging market currencies seem unattractive to investors recently.

Latin American currencies, which clocked record quarterly gains in the beginning of the year, have now lost their shine as the rally in commodity prices cools and economic worries rise.

Brazil’s real was last down at 5.08 to the dollar as prices of one of its largest exports, iron ore, tumbled more than 5% after China reinforced its tough COVID-19 response policy that has hit economic activity, prompting traders to be more cautious.

The real is set for a weekly decline of 2.4%, while the MSCI’s broader Latin American currencies index fell 1.2% in the same period.

Brazil’s central bank’s monetary policy committee (Copom) increased the Selic interest rate by a full percentage point on Wednesday, but flagged a smaller rise next month even as inflation figures remain in double-digits.

“The central bank’s monetary plan is following the script to address this stubborn inflation,” said Alfredo Coutino, director at Moody’s Analytics.

“Monetary restriction will subdue it but also impose a cost on the economy’s recovery.”

Chile’s central bank raised the country’s benchmark lending rate to 8.25% on Thursday, above expectations, and the move lifted the peso by 0.5%. The currency is still set for a weekly decline of 0.6%.

Mexico’s peso rose 0.6% and was the only major Latin American currency to clock gains of 1.5% for the week. Investors geared up for Mexico’s central bank, known as Banxico, to raise rates by 50 basis points at next Thursday’s meeting, reaching a 200-basis point hike through year-end.

The Colombian peso strengthened 0.9% in tandem with oil prices that rose on Friday amid supply concerns.

Among other EM currencies, Turkey’s lira weakened 0.5% to 14.95 against the dollar, touching its weakest level in nearly two months, while the Russian rouble pulled back from a more than two-year high against the euro on the spectre of more sanctions against Moscow.

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