Brazil's real hovers near one-month high, Wall St slide hits stocks

The Brazilian real hovered at one-month highs on Friday as investors bet on a steady economic recovery after a slate of upbeat data this week, while a tumble on Wall Street for a second straight day hit Latin American equities.

The real rose as much as 0.9% to 5.2460 a dollar, a day after data showed private sector economic activity rose in August at its fastest pace in over seven years. Figures on Friday showed new auto sales rose 5.1%, the latest in a series of data to signal a pickup in business activity.

Brazil's government on Thursday presented to congress a constitutional reform bill aimed at simplifying and reducing the cost of its public sector, which gives the president sweeping powers to eliminate public sector jobs and bodies without congressional approval.

"The actual positive effect of this reform on public finances is very limited but from the market's point of view it is of symbolic importance," said You-Na Park-Heger, FX analyst at Commerzbank.

"We remain cautious, though, and do not bank on a continued BRL recovery. The country continues to be badly affected by the pandemic and the uncertainty in connection with the economic recovery remains high."

An index of Latin American currencies edged higher and was on course for a second straight week of gains, also helped by earlier weakness in the dollar following the US Federal Reserve's accommodative stance on inflation.

The Mexican peso firmed 0.2% as a consumer confidence index rose for the third month in a row in August. The currency has dropped 12% in 2020 and is set for its worst year since 2016 as the COVID-19 pandemic battered Latin America's no. 2 economy, forcing factories to shut and hitting trade.

A Reuters poll found FX strategists think most major emerging market currencies will hold gains made since March's financial market crash into next year. In twelve months, they expect South Africa's rand will have gained about 2.0%, the Brazilian real 7.0% and the Russian rouble 8.0%.

Elsewhere in Latin America, the Chilean peso firmed 0.3%, while the Colombian peso and Peruvian sol eased 0.4% and 0.2%, respectively.

Among stocks, the Brazilian stock index shed 1.4% and was set for its first weekly decline in three. Bourses in Chile, Mexico and Argentina fell more than 1%, taking a basket of Latin American stocks down 1.6%.

On Wall Street, the Nasdaq fell as much as 5% for a second straight day as investors sold off heavyweight tech stocks that have been largely responsible for a stunning rally in US equities since April.