November 9, 2016 / 11:42 AM / 2 years ago

Brazil real slides as Trump win boosts uncertainty

By Bruno Federowski
    SAO PAULO, Nov 9 (Reuters) - The Brazilian real tumbled on
Wednesday as Donald Trump's victory in the U.S. presidential
elections caught traders off-guard.
    Investors fled from risky assets on fears that Trump's 
pledges during his election campaign could translate into years
of policy uncertainty.
    Several polls heading into the vote had shown Democratic
candidate Hillary Clinton, who investors saw as a safer choice,
with a slight lead. 
    "The extent of the impact will depend on whether he
forcefully pushes ahead with his campaign promises or whether he
moves more towards the centre," HSBC analysts led by Murat Ulgen
wrote in a report.
    HSBC singled out currencies that have strengthened more than
its peers this year, such as the Brazilian real ,
the Russian rouble and the Indonesian rupiah, as
among the most vulnerable.
    The real tumbled 2 percent in early Wednesday trading after
strengthening over 20 percent so far this year. 
    Brazil's central bank announced before the market open it
was cancelling an auction of up to $250 million worth of reverse
currency swaps scheduled for Wednesday, without specifying why.
    Reverse currency swaps function like dollar purchases from
investors for future delivery and tend to weaken the Brazilian
    Futures contracts on Brazil's benchmark Bovespa stock index
 fell 3.2 percent.
    The Mexican peso slid as much as 12 percent to the
weakest on record but later pared losses to about 9 percent.
Traders said Trump's "conciliatory" acceptance speech helped the
currency retrace earlier losses. 
    Trump has repeatedly threatened to revoke a free trade
agreement with Mexico and tax money sent home by migrants to pay
for building a wall on the southern U.S. border.

    Key Latin American currencies at 1110 GMT:
 Currencies                               daily %    YTD %
                                           change   change
 Brazil real                      3.2330    -2.04    22.08
 Mexico peso                     19.9120    -8.00   -13.47

 (Editing by Chizu Nomiyama)
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