Robust GDP data takes Brazil's real to 5-month high

Brazil's real surged 1% to lead Latin American currencies higher on Tuesday after data showed faster-than-expected economic growth, while a weaker dollar buoyed most other regional peers.

The real touched a five-month high. GDP expanded by 1.2% in the first quarter for the third quarter of growth, taking Latin America's largest economy back to its size at the end of 2019 before the pandemic.

With COVID-19 cases surging and government expenditures at the risk of breaching a spending cap, investors have remained wary of Brazil markets. But rising commodity prices this year as economies reopen after pandemic-induced curbs have helped improve sentiment.

With public revenues coming stronger than expected and higher inflation prints increasing the GDP deflator faster than previously expected, fiscal results may also improve in spite of higher spending, strategists at Citi Research said, but warned that positive effects should be restricted to this year only.

Mexico's peso rose 0.5%, while Chile's peso climbed 0.6% against a dollar which awaits US jobs data due later this week to assess the health of the world's biggest economy and for clues on the Federal Reserve's policy stance.

Peru's sol lost 0.7% as anticipation builds for presidential elections over the weekend with the two leading candidates - right wing Keiko Fujimori and socialist Pedro Castillo - neck-and-neck in polls. This comes after a Castillo win looked most likely after the first-round vote.

"This narrowing (in polls) is consistent with our view that Fujimori has room to improve in the final week," Citi said.

Peruvian markets, considered a safe haven among Latam markets, have been pressured by the vote, with the sol hitting all-time lows in recent weeks on the prospect of a socialist leadership.

Among stocks, Brazil's Bovespa jumped 1.3% with energy firm Cosan SA rising 3.4% after it said that Raizen Combustiveis, its joint venture with Royal Dutch Shell PLC, is expected to file for an initial public offering in the next few days.