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