NEW YORK, Nov 14 (Reuters) - Brazil's real was slightly higher in volatile trading on Monday as investors awaited details on President-elect Luiz Inacio Lula da Silva's fiscal spending plans, while other Latin American currencies edged higher against the dollar amid mixed comments from U.S. central bank officials.
Brazil’s real BRBY, which dropped 5% last week, swung between gains and losses and was last up 0.4%. Lula’s push to secure higher social spending in 2023 has alarmed investors who worry that the leftist will run a fiscally loose administration.
A media report said Lula’s transition team will weigh a more conservative alternative to finance next year’s social outlays.
“Headlines increasingly point to changes that would expand the 2023 deficit by a wider margin than we expect, around BRL 175 billion,” economists at J.P.Morgan said.
Data on Monday showed economic activity in Brazil resumed expansion in September, though less than expected.
Meanwhile, aiding the sentiment, U.S. President Joe Biden met Chinese leader Xi Jinping in person, engaging in a three-hour meeting before the Group of 20 (G20) summit, with both men stressing the need for a better dialogue between their nations and establishing a mechanism for more frequent communications.
“Primarily it’s a message that’s being sent through global markets about China and the U.S. kind of amending the relations,”said Juan Perez, director of trading at Monex USA in Washington.
Globally, investors also digested comments from Federal Reserve Governor Christopher Waller and Fed Vice Chair Lael Brainard to try to determine the path of the central bank’s interest rate hikes.
“Markets are still a bit sensitive to inflationary fear. But if data moving forward starts showing that there are some deflationary pressures … that would be perhaps even more of a negative for the dollar down the line,” Perez said.
The dollar =USD was up 0.4%, after falling 4% last week. FRX/
Wall Street banks are raising their outlook for emerging markets’ hard-currency bonds on the basis that a slowdown in U.S. rate hikes could provide some relief for the asset class.
Chile’s peso CLP= was flat while the Peruvian sol PEN= added 0.6%.