EMERGING MARKETS-LatAm currencies rise as weak US jobs data dents dollar; Brazil vote in focus

By Utkarsh Hathi

Oct 2 (Reuters) - Most Latin American currencies strengthened against the dollar as weaker-than-expected US jobs data reduced odds of a Federal Reserve interest rate hike in October, while stocks were mixed, with investors also monitoring Brazil's presidential election.

US nonfarm payrolls increased by 29,000 jobs in September, well below economists' expectations of 90,000 in a Reuters' poll. The unemployment rate rose to 4.2% from 4.1% in August.

The report, coupled with softer-than-expected inflation figures earlier this week, eased immediate concerns about a Fed rate hike later this month. Markets are now pricing in a 17% chance of a hike, down from 22% before the data, according to CME Group's FedWatch Tool.

"The combination of weak jobs (and) slowing inflation should give the Fed room to pause for a bit," said Paul Dmitriev, senior analyst & co-portfolio manager at Global X ETFs.

US 10-year benchmark yields fell further after the data, weighing on the dollar. The greenback slipped 0.1% after reaching a more than one-year high on Thursday, boosting appetite for riskier emerging market assets.

MSCI's index tracking Latin American currencies rose 0.33%, though it was still heading for a second straight week of declines, while its stocks equivalent .MILA00000PUS edged 0.07% lower.

Mexico's peso rose 0.7%, though it remained near its weakest levels since December 2025.

The Colombian peso gained the most among its peers, up 1.2%, while Brazil's real was one of the few major regional currencies to weaken against the dollar, down 0.3%.

BRAZIL VOTE IN FOCUS

Markets are closely watching the first round of voting on Sunday in Brazil's presidential elections, with the outcome expected to shape expectations for fiscal policy in Latin America's largest economy.

Incumbent President Luiz Inacio Lula da Silva is leading Senator Flavio Bolsonaro by 3 percentage points, though the race remains statistically tied with the margin of error at 2 percentage points, a Datafolha poll showed on Thursday.

Fiscal concerns in the region's largest economy remain at the forefront of investors' minds, with hopes that a Bolsonaro victory could pave the way for reforms aimed at improving public finances.

A Lula win could raise concerns about higher spending and a slower pace of fiscal consolidation.

"No one is anticipating a first-round victory. So the question is, how close will it be, and what does that imply for the second-round runoff later on October 25?" said Dmitriev.

"If things are quite tight, the market will anticipate a Bolsonaro victory and there could be a relief rally."

Despite the uncertainty, the currency's outlook was stable ahead of the elections, a Reuters poll of FX strategists showed.

Analysts at UBS said the Brazilian real was likely to react sharply to Sunday's first-round vote, with investors focused on what the relative strength of the two leading candidates could mean for the country's fiscal outlook and debt dynamics.

Argentina's economy minister Luis Caputo announced on X that the country will launch South America's first citizenship-by-investment program. Argentina's benchmark stock index .MERV was one of the few gainers among regional equities, up 0.2%.

Separately, Goldman Sachs said on Friday that Latin America would be the region most exposed to any US ban on diesel exports, with more than 50% of diesel consumption in Chile, Mexico, Peru, and Ecuador met through imports from the US.

Key Latin American stock indexes and currencies at 14:55 GMT