Brazilian real dips as political woes outweigh data

  • The real fell by 0.4% after Brazil's Supreme Court Justice Rosa Weber authorized an investigation of President Jair Bolsonaro over the procurement process for an Indian COVID-19 vaccine.
05 Jul, 2021

Brazil's real fell on Monday despite positive economic data, weighed down by growing concerns over corruption in the country, while the Mexican peso was pulled down by a drop in oil prices.

The real fell by 0.4% after Brazil's Supreme Court Justice Rosa Weber authorized an investigation of President Jair Bolsonaro over the procurement process for an Indian COVID-19 vaccine.

Protesters took to the streets in Brazil demanding Bolsonaro's impeachment and a faster vaccine rollout as the country battles against COVID-19.

Recent political developments, particularly Bolsonaro's declining popularity, have removed the sheen from the real, which had been propped up this year by positive data and a hawkish central bank.

Brazil's vaccine rollout has also lagged behind those of many of its regional and emerging market peers.

The real is up about 2.6% this year, having gained as much as 5.8%, and is still the best performer in Latin America.

Data on Monday also showed private sector business activity in Brazil roared back to life in June, benefiting from the easing of some COVID-19 restrictions.

Mexico's peso fell 0.5%, tracking a recent dip in oil prices, though data showed increasing Mexican consumer confidence in June.

The currency had surged on the central bank's surprise interest rate increase in June, which made the peso appear more attractive for carry trade.

Losses in Chile's peso were capped on Monday by a rise in the price of copper, the country's top export.

Broader emerging market currencies rose as weak US labor data continued to weigh on the dollar. But trading was expected to be light because of a public holiday in the United States.

The prospect of a weak US jobs market is expected to keep the Federal Reserve from tightening monetary policy in the near term and benefit emerging markets.

Colombian markets were also closed for a holiday.

Elsewhere, Chinese ride-hailing giant Didi Global Inc said a regulatory order that its app be removed from app stores in China could hurt revenue.

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