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 said it would allow a managed float of the peso and would abandon its current “uniform daily devaluations and introduce greater volatility”.

The Chilean peso CLP= dropped against the dollar after prices of its main export, copper, fell from a near one-week high hit in the previous session, as top consumer China was absent from the market due to a major holiday. MET/L

Stocks in Latim America were mostly higher, with the MSCI’s index .MILA00000PUS rising 0.6%, tracking a higher open on Wall Street. .N

Key Latin American stock indexes and currencies at 1358 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1114.46

0.59

MSCI LatAm .MILA00000PUS

1864.52

0.55

Brazil Bovespa .BVSP

95927.80

0.42

Mexico IPC .MXX

37459.25

0.11

Chile IPSA .SPIPSA

3606.55

0.51

Argentina MerVal .MERV

0.00

Colombia COLCAP .COLCAP

1170.84

-0.31

Currencies

Latest

Daily % change

Brazil real BRBY

5.6244

-0.03

Mexico peso MXN=D2

21.4325

0.10

Chile peso CLP=CL

797.2

-0.25

Colombia peso COP=

3837.9

0.12

Peru sol PEN=PE

3.5698

-0.03

Argentina peso (interbank) ARS=RASL

77.0200

0.12

Argentina peso (parallel) ARSB=

151

0.66

(Reporting by Shreyashi Sanyal in Bengaluru Editing by Alistair Bell)

(([email protected]; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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