By Shreyashi Sanyal

Oct 8 (Reuters)The Brazilian real traded lower on Thursday on continued worries about the country’s public finances, although a record reading on retails sales helped limit declines, while other Latin American currencies struggled for direction.

The real BRBY, BRL= edged 0.2% lower, as investors worried about a new fiscal package, known as Renda Cidada, overshooting the government’s spending limit after a volley of mixed information.

“The (Brazilian) government’s intention to create a new social welfare program poses additional risk to the trajectory

of the public accounts,” economists at Credit Suisse noted.

“Despite the government’s decision to revise the proposal after strong backlash, the source of funding for the new program remains uncertain. The main concern is the observance of the spending cap.”

Data from Latin America’s biggest economy provided some support to the currency after Brazilian retail sales rose to their highest on record in August, as economic activity continued to recover from the worst of the nationwide lockdown measures from earlier this year.

Mexico’s peso MXN= was mostly flat in volatile trading. Data showed Mexican inflation cooled to 4.01% in the year through September as consumer prices for energy dropped and food price rises were lower.

A recent Reuters poll showed that Latam currencies are set to remain weighed down this quarter by continuing fears about Brazil’s public finances and Mexico’s close link to U.S. politics before the November presidential vote.

However, Goldman Sachs said lighter investor positioning in emerging markets heading into the U.S. presidential election than before the 2016 vote, suggests “knee-jerk” reactions to the outcome may be contained.

Argentina’s peso ARS=RASL steadied after hitting a record low it hit in the previous session.

The currency was exposed to a fresh bout of selling pressure after the country’s central bank

By Julien Ponthus

LONDON, Oct 7 (Reuters)The dollar steadied on Wednesday, ticking down against most currencies after an initial jump triggered by U.S. President Donald Trump cancelling stimulus talks with Democrat lawmakers, a move which increased demand for safe-haven assets.

Trump’s surprise decision to call off stimulus talks until after the Nov. 3 presidential election initiated a selling spree on Wall Street with investors bracing for fresh downside risks for an already shaky U.S. economy.

The initial shock from the announcement eased when the U.S. President later asked Congress to extend $25 billion in new payroll assistance to U.S. passenger airlines.

Sentiment improved overnight in Asia where markets hit a two-week high and U.S. stock futures made their way back to positive territory.

All in all, analysts said the renewed uncertainty over stimulus would encourage investors to trade riskier currencies cautiously.

“This is set to reinstate caution in markets about the prospects of near-term economic recovery, helping the safe haven dollar and keeping cyclical FX soft”, ING strategists wrote in a morning note.

In early trading in Europe, the dollar was last quoted at $1.1754 per euro EUR=D3, down 0.18% after a 0.4% gain against the common currency during the previous session.

The British pound GBP=D3 was quoted at $1.2915, up 0.36% after losing 0.86% on Tuesday.

The Australian dollar AUD=D3 edged up 0.57% to $0.7142 after tumbling by more than 1.1% on Tuesday.

Traders say the Aussie faces more downside risks due to expectations that the Reserve Bank of Australia’s next move is to cut rates and buy more government debt.

The increased risk aversion, however, did not move the dollar much against the yen, which was last quoted at 105.75 JPY=D3, because both currencies tend to be bought during times of uncertainty, analysts