By Susan Mathew

Oct 2 (Reuters)Argentina’s peso dropped on Friday after the central bank said it would allow a managed float of the currency, while most other Latin American units fell as global sentiment took a hit after U.S. President Donald Trump tested positive for COVID-19.

The Argentine peso ARS=RASL led losses with the bank saying it would abandon its current “uniform daily devaluations and introduce greater volatility” as the gap between the official exchange rate and the rate quoted in the country’s informal currency markets widened close to 93%.

The bank said it would offer trades at 76.95 pesos per dollar at Friday’s open, around 0.91% weaker than the close on Thursday. It also increased the important overnight repo rate to 24%, from the current 19%.

“Even if the number of measures announced is not low, we do not expect them to change the current dynamics. The measures are likely to be seen as insufficient and hence run the risk of being counterproductive,” Citigroup Latam FX strategists said a note.

“Even if increasing the repo rate is a move in the right direction, the size of the increase is probably too small given the size of the imbalance currently observed in the official FX market,” they said, adding that raising the rate of volatility of the official FX rate will not encourage a higher supply of dollars but rather have the opposite effect.

The safe-haven dollar gained traction after Trump and wife, Melania, contracted the disease just four weeks before U.S. elections. FRX/

Mexico’s peso MXN= fell as much as 1% before trading steady, while the currencies of Colombia COP= and Chile CLP= declined 0.4% and 0.6%, respectively.

Brazil’s real BRBY, meanwhile, rose 0.6% in volatile trade with data showing industrial output in the country

By Sagarika Jaisinghani

Sept 29 (Reuters)The Brazilian real and the Mexican peso outperformed Latin American currencies on Tuesday following a slump in the past two sessions, while regional equities tracked a slide on Wall Street ahead of the U.S. presidential debate later in the day.

The real BRBY was up 0.2% by 1524 GMT, with the dollar slipping from recent two-month highs as investors held off on making big bets ahead of the first debate between U.S. President Donald Trump and Democratic challenger Joe Biden. FRX/

Brazil’s real has fallen to record lows this year due to the economic fallout from the COVID-19 pandemic, although a string of recent data has raised hopes that Latin America’s largest economy could return to growth next year.

Investor sentiment has also been subdued by concerns around the government’s plans to fund a new minimum income program called Renda Cidada, which translates as “Citizen Income”.

“The market is still digesting the news of the Citizen Income financing and will be waiting for some explanation from the government” on how to reconcile this spending with an already tight budget, said Victor Beyruti, economist at Guide Investimentos.

The Mexican peso MXN= gained 0.3%, snapping a two-day losing streak, while the country’s stock index .MXX fell half a percent with financials and consumer staples stocks leading declines.

Samuel Bentley, a client portfolio manager at fund house Eastspring Investments, told the Reuters Global Markets Forum that broad weakness in emerging stocks had created value opportunities and that his fund was considering increasing exposure to Mexico, among other countries.

The Chilean peso CLP= eased 0.2% and was on course for its second straight monthly decline, while the Peruvian sol PEN= and Colombian peso COP= shed about 0.1% each.

A basket of Latin American equities .MILA00000PUS tumbled

BRASILIA (Reuters) – The cost to Brazil’s government of servicing its ballooning domestic debt fell to an all-time low in August, official figures showed on Monday, following the drop in official interest rates and a dramatic shortening of the debt profile.

Treasury also said it is monitoring the short-term, floating rate “LFT” market closely, and expects it to stabilize soon as the recent spike in premiums over the central bank’s benchmark Selic rate “at some level” attracts buyers.

“We believe the market is undergoing a repricing shift and that, at some level, it should stabilize,” Luis Felipe Vital, head of debt management, told reporters online after the Treasury released its debt report for August.

As the Treasury chart below shows though, the average rate of interest on the domestic federal debt stock fell to a new low of 7.3% in August, and the average rate of interest on new domestic debt issued in the 12 months to August fell to 4.85%.

Brazil debt interest costs: https://fingfx.thomsonreuters.com/gfx/mkt/xklvyqbjzvg/AUGDEBT.png

The average cost of servicing the wider federal public debt load, meanwhile, slipped to 8.54%, the lowest in a year.

The Brazilian interest rate curve has steepened sharply in recent weeks, with short-term borrowing costs anchored by the central bank lowering its benchmark Selic rate to a record low of 2.00%, and growing angst over Brazil’s fiscal outlook pushing up longer-term rates.

Treasury Secretary Bruno Funchal told Reuters last week that the curve steepening was a “warning” that Brazil has “no room for error” in getting its record debt and deficit back under control.

On Monday the spread between January 2022 and January 2027 interest rate futures widened to 455 basis points, even wider than the market, economic and public health crisis peaks earlier this year.

Brazil rate curve: https://fingfx.thomsonreuters.com/gfx/mkt/nmovawdbbva/DI2227.png

As investors cut back