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.
The company, known as Petrobras, saw its shares take a beating over the last month as Rousseff gained in the polls. In fact, September’s fall of 22.5 percent was the stock’s worst monthly performance since October 2008, at the height of the global financial crisis.
Investors in Petrobras have lambasted the Rousseff government for forcing the company to import fuel at global prices and sell it at a loss in the domestic market as a way to tamp down inflation.
The Bovespa also received a boost from shares of steelmaker Usiminas, which jumped 5.4 percent after rival Ternium SA announced it would purchase an additional 10 percent of voting shares in the firm. (Reporting by Asher Levine and Bruno Federowski, editing by G Crosse)