EMERGING MARKETS – Brazil’s real gains as bets rise for sharp rate hike


    * Rate hike of at least 100 bps expected in Brazil
    * Peru's sol falls as copper mine protests spread
    * Banco Inters jumps on upbeat quarterly results

    By Susan Mathew
    Oct 27 (Reuters) - Brazil's real rose on growing bets that
the country's central bank would announce a larger-than-expected
interest rate hike on Wednesday, while Peru's sol underperformed
as mine protests spread in the world's second-largest copper
    Most other Latin American currencies were flat to higher as
the dollar weakened ahead of the Federal Reserve's policy
meeting next week. Mexico's peso rose 0.3%, while Chile's
currency attempted to extend gains to a fourth straight
    The real gained 0.4% as rising worries about the
government breaching its spending cap as well as surging
inflation spurred bets that the central bank may hike its key
interest rate by more than the 100 basis points expected in a
Reuters poll. 
    "We expect (Brazil's central bank) to make a more aggressive
policy rate adjustment by hiking rates by 150bps, aimed at
containing inflation expectations and stabilizing BRL. There is
some risk of an even more aggressive move," said Sacha Tihanyi,
head of emerging markets strategy at TD Securities. 
    "The risk to BRL is skewed to the downside. We believe that
a 150bp rate hike, with a commitment of another equivalent hike
at the December meeting, will be required to bolster BRL."
    But market experts have warned that the aggressive pace of
hikes - 425 basis points already so far this year - could
squeeze growth in Latin America's largest economy. 
    Brazilian President Jair Bolsonaro continues to face
political headwinds ahead of elections next year. A Brazilian
Senate investigative committee approved a report on Tuesday
calling for the far-right president to be indicted for crimes
related to his handling of the coronavirus pandemic.

    Peru's sol fell 0.3% as protests at copper mines
spooked investors about production of the Andean nation's main
export - copper. 
    In the latest in a string of protests against mining
companies, Peru's Antamina copper and zinc mine, which is
part-owned by Glencore and BHP Billiton, said
on Tuesday that protesters had blocked a road it uses, demanding
that it honor its commitments to the local area.
    Among stocks, Brazil's Bovespa index outperformed
with a 1.6% rise. Banks led gains, with Banco Inter
jumping 6.7% as the SoftBank-backed digital lender reported a
strong increase in quarterly profit. It had reported a loss in
the same period last year.
    Petrobras inched higher as the government
reiterated that the privatization of the state-run oil company
is being considered - a move seen as highly unlikely by
    Key Latin American stock indexes and currencies at 1425 GMT:
   Stock indexes           Latest    Daily %
 MSCI Emerging Markets      1285.28    -0.83
 MSCI LatAm                 2205.52     0.88
 Brazil Bovespa           108090.37     1.57
 Mexico IPC                51990.20    -0.41
 Chile IPSA                 4174.85    -1.67
 Argentina MerVal          88518.73   -0.438
 Colombia COLCAP            1414.05     0.05
      Currencies           Latest    Daily %
 Brazil real                 5.5482     0.42
 Mexico peso                20.1665     0.17
 Chile peso                   804.4    -0.07
 Colombia peso               3762.4     0.11
 Peru sol                    3.9879    -0.33
 Argentina peso             99.6000    -0.04
 (Reporting by Susan Mathew in Bengaluru
Editing by Paul Simao)

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