Brazil's real dropped 1% to lead losses across Latin American currencies on Friday with all eyes on the central bank's policy meeting next week, while mining major Vale declared a bumper $7.6 billion first-half dividend payout.
The real is down about 1.7% for the week, the worst performer among regional peers. Next week the central bank is seen hiking interest rates by 100 basis points as inflation surges.
But traders are cautious after central bank chief Roberto Campos Neto earlier this week said he would not change his plans with every indicator showing high inflation pressures, signaling he may hint at a ceiling for the current tightening cycle.
"Commentary from Neto seemed to indicate there is no interest to combat inflation with more rate hikes," said Juan Perez, a senior currency traded at Tempus Consulting.
"This is scaring traders because the idea was to count on tightening, but the lack of concern from the official is making many think they will stop."
Strong dollar dents currencies; Latam stocks join global sell-off
Political sentiment also weighed on the real as investors feared populist policies by President Jair Bolsonaro with his popularity sliding ahead of elections next year.
Bolsonaro on Thursday signed a decree to raise taxes on financial transactions - charged on credit, foreign exchange, insurance transactions, or bonds or securities - for three months to pay for the so-called Auxílio Brasil pandemic welfare program.
Mexico's peso was flat, while Colombia's peso gave up 0.5% as oil prices fell.
Markets in Chile were closed for a holiday.
In Argentina, the benchmark 2035 dollar-denominated sovereign bond fell slightly.
Argentina's center-left President Alberto Fernandez called for unity on Thursday after a rebellion from hard-left ministers threatened to break apart the ruling coalition following a bruising loss in a midterm primary election.
"Markets will likely be on a wait-and-see approach as the government tries to take the reins," Tempus' Perez said.
Among shares, iron ore miner Vale gave up fleeting gains to lose almost 3% and hit seven-month lows, tracking a 7% slump in prices of the steel-making ingredient.
The company late on Thursday declared a 40.2 billion real, or 8.11 reais ($1.54) per share, first-half dividend, its largest payout since the miner's 2019 dam collapse.
Sao Paulo's Bovespa equity index was down 1.7%, extending losses to a fourth straight session. It was set to underperform Latam peers on the week, down almost 2%.
El Salvador bonds are eyed after a tumble last session on fears the country will not reach a potential $1 billion loan agreement with the International Monetary Fund and faces negative credit implications linked to its use of bitcoin.