By Bansari Mayur Kamdar and Anisha Sircar
May 27 (Reuters) – The Colombian peso slipped ahead of the presidential election on Sunday which leftist contender Gustavo Petro is expected to win, while Latin American currencies headed for their second straight week of gains.
Petro has consistently led opinion polls for the presidential vote against a center-right candidate seen as the natural successor to the incumbent leader, and an eccentric business magnate.
“Colombia used to be among the countries where policy continuity was never in question, but the current list of frontrunners includes a rather interesting personality from the far left… Many observers argue that Petro’s victory is yet to be fully priced in by the market,” said Natalia Gurushina, EM Fixed Income economist at VanEck.
The Colombian peso COP= reversed gains from earlier in the day to slip 0.3% against the dollar, and was up 1% on the week, underperforming regional peers despite stronger crude prices. O/R
“(The peso) has done a round trip in May,” said Edward Al Hussainy, senior interest rate and currency analyst at Columbia Threadneedle. “Relative to where oil prices are today, the peso is very weak for a pretty oil-heavy currency,” he said, adding that the gap suggests that a lot of political risk has already been baked into the peso.
Colombian corporates remain well positioned to face the challenging political and operating environment engulfed in political uncertainty, according to a new Fitch Ratings report.
The MSCI’s index for Latin American currencies .MILA00000CUSrose to its highest level in more than a month and extended gains for a second straight week, while stocks .MILA00000PUSadded 1.4%.
In Brazil, a new survey by pollster Datafolha showed former President Luiz Inacio Lula da Silva has increased his polling lead over incumbent Jair Bolsonaro ahead of the October presidential election.
The Brazilian real BRBY, =BRL rose 0.8%, heading for a third straight week of gains.
The Bovespa .BVSP edged 0.3% higher. Miner Vale SA VALE3.SA gained 1.5%, tracking a recovery in iron ore prices which were boosted by hopes of additional stimulus measures from China.
Mexico’s peso MXN= rose 0.8%, helped by weakness in the dollar =USD, after minutes from the Federal Reserve’s May meeting earlier this week calmed fears that the U.S. central bank could become more aggressive.
Elsewhere, Russia’s rouble RUBUTSTN=MCX extended losses against the dollar after plunging around 10% in the previous session as the central bank slashed interest rates and the prospect of easing capital controls as well as a possible sovereign default hammered the currency. RU/RUB
Key Latin American stock indexes and currencies at 1928 GMT:
Daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia COLCAP .COLCAP
Daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
Argentina peso (parallel) ARSB=
(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Nick Macfie and Diane Craft)
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