May 23, 2016 / 8:55 PM / 3 years ago

EMERGING MARKETS-Brazil currency drops on local political woes

(Updates with planning minister stepping down)
    By Bruno Federowski
    SAO PAULO, May 23 (Reuters) - Brazil's currency fell sharply
on Monday following the resignation of a high-ranking minister,
in charge of securing legislative support for fiscal austerity
measures, who had sought to obstruct a sweeping corruption
    Mexico's peso also dropped more than 1 percent in
afternoon trading after hawkish comments from U.S. Federal
Reserve policymakers reinforced expectations for a U.S. interest
rate hike in June or July. Traders often treat Mexico's currency
as a proxy for other emerging markets.
    But Argentina's currency outperformed its peers
in the region, touching its highest in nearly four months, amid
renewed inflows of dollars from the country's agricultural
    The drop in the Brazilian real came after excerpts from
taped conversations showed the country's Planning Minister
Romero Jucá agreed to a "national pact" to weaken Brazil's
biggest ever corruption investigation. 
    The real dropped 1.8 percent, leading the losses
among Latin American currencies.    
    Jucá said he would temporarily step down after his comments
became public, dealing a huge blow to Interim President Michel
Temer, who had counted on the experienced senator to secure
legislative support for key economic measures and reforms.
    "To lose a minister this soon would spell very bad news for
this administration's credibility," Arlindo Sá, a derivatives
broker with Ativa brokerage in São Paulo, said earlier on
Monday, before Juca stepped down.
    Brazil's Finance Minister Henrique Meirelles said the
government will announce short- and long-term measures on
Tuesday to tackle growing debt and limit spending. 
    Shares of Petrobras  fell more than 4
percent, tracking a decline in oil prices, which weighed on the
country's benchmark Bovespa stock index.

    Key Latin American stock indexes and currencies at 1957 GMT:
 Stock indexes               Latest          Daily   YTD pct
                                               pct    change
 MSCI Emerging Markets            788.78      0.45     -1.12
 MSCI LatAm                     2,053.19     -1.27     13.65
 Brazil Bovespa                49,195.55     -1.06     13.48
 Mexico IPC                    45,234.76      0.17      5.25
 Chile IPSA                     3,946.26      0.16      7.23
 Chile IGPA                    19,435.95      0.16      7.08
 Argentina MerVal              12,489.46     -1.31      6.97
 Colombia IGBC                  9,820.99       0.2     14.90
 Venezuela IBC                 15,269.06     -1.29      4.67
 Currencies                       Latest     Daily   YTD pct
                                               pct    change
 Brazil real                      3.5856     -1.96      9.16
 Mexico peso                     18.5165     -1.00     -7.47
 Chile peso                       694.07     -0.42      2.20
 Colombia peso                   3,060.2     -0.37      3.44
 Peru sol                          3.344     -0.36      2.05
 Argentina peso (interbank)      13.9900      0.36     -7.76
 Argentina peso (parallel)         14.62      0.34     -2.45
 (Additional reporting by Paula Arend Laier and Anna Yukhananov;
Editing by Diane Craft and Alistair Bell)
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