EMERGING MARKETS-Latam currencies sink on U.S. data; Brazil election eyed

viernes 3 de octubre de 2014 13:00 GYT

SAO PAULO Oct 3 (Reuters) - Latin American currencies weakened on Friday after strong U.S. jobs data was seen as increasing the likelihood of higher interest rates in the world's largest economy, while Brazil markets fluttered in the last trading session before Oct. 5 elections.

Data on Friday showed U.S. employers stepped up hiring in September while the jobless rate fell to a six-year low. The rosy data bolstered bets that the U.S. Federal Reserve would hike interest rates in mid-2015, fueling demand for the dollar and sinking riskier currencies.

The Chilean, Colombian and Mexican pesos all fell about 0.5 percent against the dollar.

Brazil's real fluctuated through most of the session, at one point weakening past the closely-watched level of 2.5 per dollar for the first time since December 2008 before pulling back in the afternoon.

Investors have been on edge for weeks as Brazilian electoral polls shifted the outlook for the country's presidential race on Sunday. Two new polls released late Thursday showed President Dilma Rousseff widening her lead over challengers.

The real tends to weaken when polls show Rousseff gaining as many investors believe a more market-friendly administration could help boost demand for Brazilian assets.

Investors have been cautious near the 2.5 reais per dollar level as it is a "limiter," according to trader Marcos Trabbold at B&T in Sao Paulo. The real at that level could fuel inflation and increase the chances of additional central bank market intervention, he said.

The region's stocks were mostly higher, driven by the improving outlook for global economic growth following the U.S. data and bargain-hunting after a recent slump. The MSCI Latin American stock index was up about 1.2 percent after touching its lowest point in six months on Thursday.

Brazil's Bovespa stock index rebounded for the second day in a row, rising 1.6 percent led by a near 6 percent rise in preferred shares of state-run oil producer Petroleo Brasileiro SA.   Continuación...