Brazil's real slumps 1% as presidential campaigns begin



By Susan Mathew

Aug 16 (Reuters) - Brazil's real slumped 1% on Tuesday, with investors eyeing the start of presidential election campaigns, while other Latin American currencies also slipped as rising recession worries pushed investors to the safety of the dollar.

A poll on Monday showed leftist Luiz Inacio Lula da Silva has a 12-percentage-point lead over far-right incumbent President Jair Bolsonaro ahead of the October election.

"As Colombia, Chile, Peru also align with left of the center politics, the return of Lula has more excitement under its wings," said Juan Perez, senior FX trader & strategist at Monex USA.

There will be a push towards more serious and intertwined economic cooperation, Perez said. Analysts have warned of significant volatility in the real BRBY as the campaigns progress.

"It'll be a wild ride. Their campaigns are vastly different and Lula does have a past that may haunt BRL, so if he leads, expect USD pressure over BRL."

"The more leftist candidate in Latin campaigns tend to scare global western-driven markets that do not seek a reform or shift towards more regional integration and less so with the globalized financial and commercial system."

During the 2018 presidential election, the real had fallen 7.4% in August, inched up in September and jumped 8.8% in October when Bolsonaro won elections on a promise to simplify and reduce taxes, create jobs, clean up politics, shrink the state and crack down on crime.

Other Latam currencies also fell against a dollar which steadied after hitting its highest in three weeks. Weak retails sale and factory activity out of China this week raised worries about economic recovery in the world's second largest economy, prompting a rate cut by China's central bank.

"In general the buck has returned to dominance because the news out of China has been bad for way too long to the point where it is really threatening the interconnectedness of the globalized system," said Perez.

Mexico's peso MXN= eased from two-month highs, down 0.5%. Falling oil prices knocked crude exporter Colombia's peso COP= 1.4% as it caught-up after along weekend.

Stocks, meanwhile rose, with Brazil's Bovespa .BVSP hitting a four-month high, up 0.1%, while Mexican shares .MXX scaled two-month peaks.

Key Latin American stock indexes and currencies at 1456 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

1014.28

-0.07 .MSCIEF

MSCI LatAm

2241.84

-0.78 .MILA00000PUS

Brazil Bovespa

113167.43

0.12 .BVSP

Mexico IPC

48801.30

0.34 .MXX

Chile IPSA

5410.33

0.29 .SPIPSA

Argentina MerVal

125675.82 -0.241 .MERV

Colombia COLCAP

1339.41

0.65 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.1453

-1.07 BRBY

Mexico peso

19.9444

-0.61 MXN=D2

Chile peso

883.1

-1.04 CLP=CL

Colombia peso COP=

4204.59

-1.13 Peru sol

3.8698

-0.64 PEN=PE

Argentina peso

135.4200

-0.61 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru; Editing by Marguerita Choy

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