Latin American currencies weakened sharply on Friday after a much stronger-than-expected US jobs report fuelled bets the Federal Reserve may start cutting back on its stimulus program later this year. The Brazilian real fell to 2.33 per dollar for the first time in more than two months after the US Labour Department said employers added 204,000 new jobs to their payrolls in October, way more than the 125,000 new posts expected by economists.
The Fed has said it will begin to roll back its $85 billion-per-month bond purchases, which for years have supported investor appetite for emerging market assets, once the US economy and labour market pick up. The Brazilian real weakened more than 1.3 percent to 2.3358 per dollar, its weakest level since early September. The currency is down more than 12 percent this year.
Traders speculated that the Brazilian central bank, in an attempt to cushion the real's losses and avoid inflation pass-through, could step up its market intervention by offering to roll over currency swaps that mature in the beginning of December. The Mexican peso fell 0.7 percent to 13.3205 per dollar, its lowest in a month. But the currency is down less than 4 percent this year and is set to easily outperform the real over the next 12 months as investors remain optimistic about prospects for reforms in the long term, a Reuters poll showed. Mexico's president has been pushing a host of reforms through Congress designed to beef up growth, from a bid to boost the country's weak tax take to measures to increase production at state oil giant Pemex.