Chile's peso weakened to an almost two-year low on Friday on bets centre-left candidate Michelle Bachelet will win the presidency this weekend for a second time, while Mexico's peso firmed to cap a strong week. Latin American currencies got a lift this week on bets the US Federal Reserve, under the likely leadership of Janet Yellen, will not move quickly to cut back monetary stimulus that has supported demand for riskier assets around the globe.
Chile's peso shed 0.42 percent to 521 per dollar. Earlier this week it hit 524, its weakest since late 2011. Ex-president Michelle Bachelet is projected to easily win Sunday's elections. Her pledge to raise corporate taxes and seek more wealth redistribution has pressured the currency in recent weeks. Strategists at CitiFX said the Chilean peso could rally back against the dollar if voters do not give Bachelet's coalition a three-fifths majority in the senate, which would be needed to pass major reforms.
The Chilean peso has also been hurt by concerns that prices for copper, the country's top export, will keep slumping amid a global supply glut in the industrial metal. Mexico's peso firmed a slight 0.17 percent, to gain just shy of 2 percent against the dollar during the week, breaking back past the psychological 13-per-dollar level to trade at 12.94 per dollar. The Mexican peso's gains marked its best week since mid-September. Some strategists expected the currency to make further ground toward the 12.80 level.
Brazil's market was closed for a holiday. The Brazilian real bounced back from a more than two-month low this week, helped by the view the Fed as well as local central bank intervention will prop up the currency. Brazil's central bank has been selling currency swaps to provide investors with a hedge against a possible depreciation of the real, helping reduce demand for dollars on the spot market.
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