Latin American currencies rose on Thursday after comments from US Federal Reserve chief Jerome Powell boosted the prospects of an interest rate cut this month, with Brazil's markets buoyed by optimism over the government's pension reform.
The Brazilian real jumped 0.4%, its fourth straight day of gains that took the currency to over a four-month high, although the Bovespa stock index retreated from a record high set in the previous session.
Brazil's markets have rallied this week as investors draw comfort from progress in the government's efforts to overhaul the pension system, a cornerstone of President Jair Bolsonaro's economic agenda aimed at saving the public purse around 1 trillion reais ($263 billion) over the next decade.
The lower house passed the main text of the bill on Wednesday by a far wider margin than predicted.
House Speaker Rodrigo Maia said he hoped the complete bill could be put to a second, final vote by Friday or early Saturday. That would allow the Senate to take up debate in August after a two-week recess.
"We are particularly bullish on BRL. The next risk to watch is the extent of the amendments that would lower the expected savings from the reform," Morgan Stanley analysts wrote in a note, setting a target of 3.65 per dollar for the real.
Sao Paulo-listed stocks were down about 0.5% as banking stocks weighed. Shares in Petroleo Brasileiro SA gained 1.3% after Goldman Sachs started coverage of the state-run oil company with a "buy" rating.
In testimony to a congressional committee, Powell pointed to "broad" global weakness that was clouding the US economic outlook amid uncertainty about the fallout from a trade conflict with China and other nations. Hopes of central banks turning dovish in the wake of a global slowdown have supported risky, emerging market assets.
Mexico's peso stabilized from steep losses this week after abrupt exit of former Finance Minister Carlos Urzua.
The Chilean and the Colombian pesos gained, while the Peruvian sol was flat ahead of release of monetary policy decision.
Peru's central bank held the benchmark interest rate at 2.75% earlier this month, as it had for more than a year, citing tame inflation and weak primary economic growth due to global trade tensions.