Brazil currency leads LatAm losses on political woes

Sao Paulo / Reuters

Brazil’s currency led losses in Latin American markets on concerns that a political crisis threatening President Dilma Rousseff may drag on longer than expected, while the central bank moved to weaken the real for a third straight day.
Latin American currencies weakened as traders reconsidered their bets on U.S. monetary policy after Federal Reserve policymakers encouraged expectations of at least two quarter-percentage-point interest rate increases this year. A slump in world crude prices helped dampen sentiment after a higher-than-expected U.S. inventory build.
“The odds of a U.S. interest rate increase have risen and that, coupled with a drop in oil prices, is hurting commodity-related currencies,” said Carlos Vieira, an economist with Lerosa Investimentos brokerage in São Paulo.
Rousseff said she will not resign despite Brazil’s worst political crisis in years, saying she had not committed any crimes.
A Supreme Court Justice questioned a decision to make public a taped conversation between Rousseff and former President Luiz Inácio Lula da Silva that sparked mass protests against the government last week.
Judge Teori Zavascki also ordered the wiretap case returned to the jurisdiction of the top court, a move traders believe could prolong Brazil’s worst political crisis in two decades. Brazilian markets have rallied in recent weeks on hopes Rousseff’s eventual ouster could rekindle investor sentiment and lay the groundwork for an economic recovery.
Many investors also booked profits on the rally, helping drive shares of state-controlled companies lower. The Brazilian real weakened 2.1 percent, more than its Latin American peers, as the central bank acted for a third day in a row to soften the currency.
Mexico’s peso fell 1.5 percent to 17.5875 per U.S. dollar, its steepest loss since mid-January.