* Real rises as much as 1%
* Brazil stocks hit over 5-month low
* Mexican inflation cools, but still above central bank
target
(Adds details, updates prices)
By Susan Mathew and Ambar Warrick
Sept 9 (Reuters) - Brazil's real currency came off session
highs on Thursday as investors weighed rising political tensions
against expectations of more interest rate hikes, while concerns
over global economic growth weighed on most Latin American
currencies.
Brazil's real traded 0.5% higher after rising as much
as 1%, with data showing inflation surged more than expected and
strengthened the case for a 100-basis-point interest rate hike
later this month.
In the wake of the release of the inflation data, Roberto
Campos Neto, the president of Brazil's central bank, said it
would use the tools at its disposal to bring inflation under
control.
But the real was still nursing a near 3% loss from
Wednesday, following President Jair Bolsonaro's verbal attack on
the Supreme Court and questioning of election integrity, as his
supporters rallied ahead of elections next year and trucker
protests disrupted export routes.
Ulrich Leuchtmann, Commerzbank's head of FX research, said a
dispute between Bolsonaro and the court could paralyze the
political system and make economic policies more difficult to
implement.
Political tensions have seen the real erase its yearly gains
to trade about 1.5% lower for the year. Stocks on Brazil's
Bovespa equity index also came off early gains and sank
0.6% to a more-than-five-month low.
Mixed economic data from the United States, coupled with
rising COVID-19 cases across the globe, have dented emerging
market currencies in recent sessions, with investors flocking to
low-risk assets such as treasuries.
Most Latin American currencies retreated on Thursday, with
MSCI's index of regional currencies falling
0.3%.
Mexico's peso was flat after inflation cooled in
August to 5.60%, but remained well above the official target of
3%, keeping alive the possibility of an interest rate hike this
month.
On Wednesday, Mexico's government proposed sharply reducing
the tax burden for state oil firm Pemex, and forecast economic
growth of 4.1% for 2022 in its draft budget.
Colombia's peso lost 0.3% as oil prices fell, while
Chile's currency, which has been hampered by recent drops
in the price of copper, hit three-week lows.
Most Latin American stocks also retreated from initial
gains, with MSCI's index of stocks down 0.6%.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1298.31 -1.16
MSCI LatAm 2352.57 -0.62
Brazil Bovespa 112772.13 -0.56
Mexico IPC 51298.55 -0.33
Chile IPSA 4400.47 0.51
Argentina MerVal 76496.94 -1.242
Colombia COLCAP 1315.05 -0.4 Currencies Latest Daily % change
Brazil real 5.2971 0.48
Mexico peso 19.9239 0.04
Chile peso 793.35 -0.81
Colombia peso 3823.89 -0.26
Peru sol 4.0981 -0.36
Argentina peso 98.0500 -0.03
(interbank)
(Reporting by Susan Mathew in Bengaluru
Editing by Paul Simao and Jonathan Oatis)
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