Dollar pressure weighs on LatAm FX; regional stocks edge higher

Most Latin American currencies traded lower on ​Thursday against the U.S. dollar near multi-week highs, while stocks were mostly higher, with domestic political ‌developments remaining in the spotlight in Brazil.

MSCI’s index tracking regional stocks (.MILA00000PUS), edged higher by 0.2%.

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With Brazil’s presidential elections fast approaching, market focus remained pinned on the contest.

An AtlasIntel/Bloomberg poll showed Brazilian Senator Flavio Bolsonaro and President Luiz Inacio Lula da Silva remain statistically tied in a simulated ​runoff ahead of next month’s vote.

Surveys lately continue to point towards a neck-and-neck race, with market sentiment heavily ​driven by shifts in electoral odds.

Against this backdrop, President Lula announced a 15% increase in cash transfers under the country’s flagship welfare program, Bolsa Familia, to shore up his support ahead of the election.

The program ​adds to investor anxiety over the deteriorating public finances under the current government.

“Brazil’s most pressing challenge is to sustainably reduce ​its abnormally high interest rates, which are weighing heavily on the public sector, businesses, and households,” Barclays analysts said in a note.

“With real rates still near double digits, maintaining the status quo for another four years is unlikely to be viable.”

The benchmark Ibovespa index (.BVSP), lost 0.3%, ​while the real inched slightly lower.

On the monetary policy front, Brazil’s central bank on Wednesday cut interest rates by 25 ​basis points for a fifth straight meeting amid firmer signs of an economic slowdown while keeping its options open ahead of the ‌election.

Across the broader currency space, MSCI’s index of Latin American currencies (.MILA00000CUS), fell 0.2%.

The U.S. dollar eased slightly after touching seven-week highs, following the Federal Reserve’s widely anticipated rate hike to the 3.75% to 4.00% range and policymakers signaling further tightening.

Elsewhere in the region, the Mexican peso gained 0.4%, after hitting an over-one-month low of 17.2710 a dollar in the prior session. Mexico’s benchmark ​stock index (.MXX), rose 0.5%, as ​trading resumed following a holiday on Wednesday.

In Argentina, data later in the day is expected to show gross domestic product likely grew 1.6% year-on-year in the second quarter, slowing from growth of 6.5% in ​the same period of 2025, according to a Reuters poll.

Earlier this week, President Javier Milei’s government ​presented its 2027 budget to Congress, forecasting 4% economic growth next year and inflation of 18%, down from 29% this year.

Local stocks (.MERV), advanced 0.8%.

MSCI’s Chilean stock index (.MICL00000PUS), rose 0.5%, supported by firmer copper prices, as the country is a major exporter of the metal. The support ​from higher metal prices also helped cushion the peso’s fall against the ​dollar, down 0.3%.