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EMERGING MARKETS-Peruvian sol leads Latam FX losses on political upheaval

·3 min read

* Sol drops up to 1.1% * MSCI currencies index down 0.7% * Brazil's Embraer falls after Q3 loss By Ambar Warrick Nov 10 (Reuters) - Peru's sol was set for its worst day in five months on Tuesday after the removal of President Martín Vizcarra, while other Latin American currencies retreated from a bumper rally in the prior session. The sol dropped about 0.9%, while Peru's dollar-denominated government bonds tumbled after the country's Congress ousted Vizcarra over corruption allegations. The move sparked immediate political tensions in the Andean country, which is already struggling from the economic fallout of the coronavirus pandemic. Mexico's peso and Colombia's peso had led gains on Monday, capitalizing on a surge in oil prices after news of a breakthrough in a coronavirus vaccine spurred widespread buying into risk-linked assets. Joe Biden's U.S. presidential election win had also fed risk appetite, on the prospect of calmer U.S. trade policies. For the day, the Mexican and Colombian pesos fell between 0.1% to 0.3%. Chile's peso fell more about 0.6% to the dollar in early trade, tracking a dip in copper prices as investors booked profits after a strong rally. Monday's rally had shown some signs of slowing late in the day as questions arose about when and how much of the vaccine would be available. For the day, the MSCI's index of Latam stocks fell 0.4%, while a currencies index retreated 0.7%. Emerging market economies also remained under pressure from the pandemic, as lockdowns due to the virus exacerbated existing issues such as inflation and fiscal spending. Brazil's real fell 0.3% against the dollar, extending losses into a second session after the currency unexpectedly pared all of its strong gains on Monday. Analysts were cautious about the real's prospects, even as Latin America's largest economy slowly recovered from the pandemic. "Although the Brazilian economy seems to be recovering well, the low key interest rate level, the lack of clarity regarding public finances and faltering reform plans against the background of the corona pandemic are likely to continue to weigh on the real," Commerzbank analysts wrote in a note. Brazilian stocks rose about 0.5%. But planemaker Embraer SA sank more than 3% after it posted a third-quarter loss and said it was preparing for a challenging 2021. Argentina's peso retreated slightly after the country's economic minister said it will seek an extended fund facility from the International Monetary Fund to replace a failed $57 billion facility. The country recently emerged from a sovereign debt restructuring after countless defaults. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1187.07 -0.44 MSCI LatAm 2095.55 -0.36 Brazil Bovespa 104033.86 0.5 Mexico IPC - - Chile IPSA 3888.42 -1.02 Argentina MerVal - - Colombia COLCAP 1213.69 - Currencies Latest Daily % change Brazil real 5.3904 -0.11 Mexico peso 20.3790 -0.25 Chile peso 762 -0.60 Colombia peso 3652.39 -0.15 Peru sol 3.6148 -0.94 Argentina peso 79.4100 -0.08 (interbank) (Reporting by Ambar Warrick in Bengaluru)