Latin American currencies weakened on Tuesday as the U.S. dollar strengthened worldwide after hitting a three-year low last week.
Currencies from Brazil , Mexico and Colombia weakened between 0.3 percent and 0.9 percent. The Chilean peso was barely changed as profit-taking partially offset the global upswing in the U.S. currency.
Concerns that the United States could pursue a weaker dollar policy and by mounting worries about the U.S. budget deficit have driven the dollar sharply lower this year.
Some investors turned to bargain hunting on Tuesday, however, ahead of a series of U.S. debt auctions.
Stock markets in the region were mostly up, with Brazil’s benchmark Bovespa stock index leading gains even after policymakers ditched a plan to curb social security spending.
Investors saw the plan as key to boosting long-term economic growth, but had mostly given up on it after months of wrangling in Congress failed to advance the unpopular bill.
“Markets already expected that the pension reform would be buried,” said Ricardo Silva, a trader at Correparti brokerage.
Moody’s Investors Service on Tuesday said the government’s decision was credit negative and will “severely restrict” policymakers’ abilities to comply with budget rules. Shares in power utility Centrais Elétricas Brasileiras SA were the biggest gainers on the benchmark index as investors bet the government would turn its efforts to the privatization of the state-owned company.