Temer's plans to streamline Brazil's pension system cleared another hurdle in Congress on Tuesday. House speaker Rodrigo Maia said a vote in the full lower house could take place between June 5 and June 12, clearing the way for a final Senate vote.

The benchmark Bovespa stock index rose 1.7 percent, led by stocks which had suffered deeply since tapes showing Temer allegedly condoning bribes to silence a witness in a corruption case went public last week.

Shares of logistics operator Rumo Operadora Multimodal SA rose for a second day, rebounding from a 23.5 percent three-day drop.

The rate-sensitive stock was bolstered by a decline in yields of interest rate futures as traders pared back bets that the central bank would be forced to cut rates at a slower pace than expected.

Still, concerns over the political environment lingered, driving the Brazilian real lower. Traders said volatility is likely to remain elevated in the medium term as the crisis drags on.

Other Latin American currencies see-sawed on thin trading volumes ahead of the release of the minutes of the Federal Reserve's last policy meeting later on Wednesday. The Mexican peso strengthened 0.3 percent, while the Colombian peso was nearly flat.

Traders have been eagerly seeking hints over the pace of US rate hikes in coming months after a batch of mixed economic data cast doubt on expectations of a fast tightening. Higher US rates could dampen demand for high-yielding emerging market assets.