Brazil's real leads gains across Latam currencies

Brazil's real jumped 1% on Monday on a robust economic outlook, while Mexico's peso broke a six-session losing streak as the dollar lost momentum after a strong rally last week.

The real attempted to push up to one-year highs hit last week. A survey of economists forecast Brazilian growth, inflation and interest rates in 2021 to new highs following the central bank's indication that it could quicken the pace of tightening.

Growth is now expected be to 5%, inflation 5.9%, and the benchmark Selic interest rate at 6.5%.

Investors seemed to look past anti-government protests over the weekend as COVID-19 deaths in Brazil topped 500,000. Thousands took to the streets blasting President Jair Bolsonaro for not acquiring vaccines fast enough and for questioning the need for mask wearing.

This comes as Bolsonaro's popularity has hit new lows ahead of elections next year. A poll last month showed a left-wing rival, former President Luiz Inacio Lula da Silva, would win in a runoff vote if the 2022 elections were held today.

"We believe a higher discontentment, especially if reflected in the polls, tends to push the government to an easier fiscal posture," Citi strategists said in a note.

LATAM FX BUCK EM GLOOM

Emerging market currencies had taken a hit last week as the dollar rallied after the US Federal Reserve struck a surprisingly hawkish tone.

Morgan Stanley in a Monday note said it had turned bearish on emerging market currencies, citing higher real rate in the United States, expensive valuations and risks for growth differentials to widen between developed and developing markets.

Most emerging market currencies in Asia, Europe, the Middle East and Africa had fallen on Monday, but Latin America got a lift as the dollar consolidated gains.

Mexico's peso looked to end its longest losing streak since February, up 0.5%, while Colombia's peso rebounded from six-week lows despite falling oil prices.

Meanwhile, BlackRock maintained a pro-risk stance, citing a "powerful restart" after the pandemic, while adding that they do not see the Fed's new outlook translating into significantly higher interest rates any time soon.

"Any temporary spikes in rates could challenge emerging market assets in particular, but we advocate staying invested and looking through any turbulence," BlackRock said in a note.

Among stocks, Brazil's Bovespa index was weighed down by materials stocks as iron ore, copper and oil prices fell.

Shares of Mexican construction companies Grupo Carso , owned by billionaire Carlos Slim, fell 1% after Mexico City Mayor Claudia Sheinbaum told the firms that built the metro railway that collapsed and killed 26 people last month to help pay for its reconstruction. She did not specify an amount.