Most Latin American currencies eye monthly declines on geopolitics

BRASILIA: Most Latin American currencies were set for monthly losses on Friday, as worries over US President-elect Donald Trump’s policies and escalating geopolitical tensions between Russia and Ukraine weighed on investor sentiment.

Brazil’s real traded in uncharted territory, dropping 0.6% to 6.0495 per dollar and on track for a more than 5% monthly drop, while its stock index fell 0.4%.

Brazilian assets have been mauled this week after its government proposed late on Wednesday to expand income-tax exemptions for lower-income Brazilians and increase taxes on those who earn more, while outlining plans to trim public spending in coming years.

“The fiscal measures announced have apparently failed to assuage market concerns about the stability of Brazil’s fiscal debt trajectory,” Dev Ashish, Latin American economist at Societe Generale wrote in a note.

“The announcement was disappointing for several reasons as the proposals come at a time when the economy is overheating due to excessive fiscal support for income and consumption.”

Uncertainty over the fiscal measures has been driving volatility in Brazilian markets amid concerns the government has not done enough to meet new budget rules passed last year to rein in the growth of public debt.

Mexico’s peso appreciated 0.3% against a globally weakening dollar, though it was set for its second-straight monthly fall.

The Mexican currency had come under pressure early this week when Trump said he would impose a 25% tariff on imports from Canada and Mexico.

MSCI’s index for Latin American currencies dropped 0.6% to its lowest level in more than 18 months, on track to log its second-straight monthly fall.

The stocks index was also set for a monthly loss, trading at its lowest level since July 2022 and down 1.1% on the day.