Brazil's real drops 1% to pull Latam FX lower

Dec 29 (Reuters) - Most Latin American stocks and currencies dropped on Wednesday with Brazil's real weakening 1% with eyes on month-end derivative settlements, while its stock index dropped to a near one-month low.

The real , fell for the second session and was set to record its worst day in over two weeks. Brazil's benchmark stock index (.BVSP) dropped 0.7%, tracking concerns about rising infections of the Omicron variant of the coronavirus.

Global risk sentiment took a hit following record numbers of confirmed daily cases of coronavirus in various parts of the world including the United States and countries in Europe. read more

MSCI's index of Latin American currencies (.MILA00000CUS) fell after it gained for five consecutive sessions, while stocks (.MILA00000PUS) fell for the second consecutive day. They were down 0.5% and 1% respectively.

Meanwhile, Brazil reported a primary budget surplus of 3.872 billion reais ($680 million) in November, much more than forecasts of a surplus of 1.1 billion reais. read more

Among other currencies in the region, higher copper prices lifted Chile's peso , up 0.6%. Chile's central bank had considered hiking the interest rate by as much as 150 basis points this month, before deciding to raise by 125 bps, minutes showed.

Mexico's peso firmed 0.4% for the fifth time in six session. Colombia's peso and Peru's sol eased 0.6% and 0.5% respectively.

In emerging currencies in Europe, Middle East and Africa, Turkey's lira fell for a third straight session, to around 12.66 to the dollar at 1930 GMT. It was about 19% down on the week, after surging more than 50% last week from record lows of 18 per dollar. read more

Worries about politically driven unconventional Turkish central bank policies have hammered the currency this year. In a Reuters poll, annual inflation was expected to exceed 30% this month, while the benchmark interest rate has been cut to 14%.

"The government’s plans to make sure TRY deposit holders get a return equal to that of foreign currency holders treats the symptom (currency devaluation) instead of the problem (inflation)," Marshall Gittler, head of investments at BDSwiss said.

"It may make the problem worse by shifting the exchange-rate risk onto the government and increasing the government’s money-printing," Gittler said.

Turkish stocks (.XU100), which had scaled all-time highs this month, were about 17% below those levels on Wednesday. On the day, they were up 2.4%, while on the year they have gained 28.4%.

Latin American stock indexes and currencies at 1940 GMT:

Reporting by Susan Mathew and Shashank Nayar in Bengaluru; additional reporting by Karin Strohecker in London; editing by Grant McCool

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