(Updates prices)
By Bruno Federowski
SAO PAULO, March 16 (Reuters) - Brazil's currency slid for a
third successive day on Wednesday on fears that a Cabinet
reshuffle could indicate a shift toward looser fiscal and
monetary policy in the crisis-ridden economy.
Those concerns were stoked by news that former President
Luiz Inacio Lula da Silva will take over as chief of staff for
his successor and protégé Dilma Rousseff.
The move offers him some protection from a sweeping
corruption investigation and gives him time to negotiate with
lawmakers who will vote on Rousseff's impeachment.
A source told Reuters that central bank chief Alexandre
Tombini may step down if Lula's return brings major economic
policy changes, although Rousseff later sought to scotch that
possibility.
Local media reported this week that the government is
considering a series of policy changes, including lowering
interest rates, boosting the supply of credit and using foreign
reserves to reduce debt.
Both Lula and Rousseff adopted similar measures over the
last decade, something many traders blame for pushing the
once-booming economy into its deepest recession on record.
Rousseff had promised to implement some austerity measures
in her second term in government, but has largely failed to do
so in the face of opposition from the ruling Workers Party.
"Markets should continue to react unfavorably to the
possibility of a policy swing," Guide Investimentos analysts
wrote in a client note.
Although the news of Lula's appointment was seen as a bad
omen for the struggling Brazilian economy, traders said those
fears had largely been priced in on Monday. The real nonetheless
fell 0.22 percent against the dollar.
The Bovespa stock index rose 1.34 percent after the U.S.
Federal Reserve bank held interest rates steady on Wednesday and
cut the expected pace of future monetary policy tightening.
Shares of state-controlled lender Banco do Brasil SA
rose 3.37 percent a day after falling more than 20
percent. Political uncertainty kept trade volatile, and Credit
Suisse affirmed its "underperform" recommendation for the stock.
Shares of Petroleo Brasileiro SA rose 9.38
percent on the back of higher oil prices. Petrobras, as the
state-run oil company is known, is the center of a draft probe
that has reached key politicians and public figures.
In Mexico, the Fed decision helped buoy the IPC stock index
, which rose 1.22 percent, while the peso rose
1.54 percent against the dollar.
Key Latin American stock indexes and currencies at 21:17
GMT:
Latin American market
prices from Reuters
Stock indexes daily % YTD %
Latest change change
MSCI Emerging Markets 791.18 0.06 -0.37
MSCI LatAm 1982.30 0.09 8.33
Brazil Bovespa 47763.43 1.34 10.18
Mexico IPC 44751.40 1.22 4.13
Chile IPSA 3861.14 0.26 4.92
Chile IGPA 18916.39 0.23 4.21
Argentina MerVal 12541.58 3.85 7.42
Colombia IGBC 9521.03 0.3 11.39
Venezuela IBC 14776.75 -3.37 1.29 Currencies daily % YTD %
change change
Latest
Brazil real 3.7450 -0.22 5.72
Mexico peso 17.6150 1.54 -2.19
Chile peso 686.2 0.15 3.42
Colombia peso 3159 0.13 0.33
Peru sol 3.3711 -0.50 1.27
Argentina peso (interbank) 14.6000 -0.45 -11.08
Argentina peso (parallel) 15.37 -0.13 -7.16
(Additional reporting by Paula Arend Laier; Editing by David
Gregorio, Bernard Orr)Our Standards: The Thomson Reuters Trust Principles.