EMERGING MARKETS-Latin American currencies rise as US jobs data weakens Fed hike bets

By Utkarsh Hathi

Oct 2 (Reuters) - Most Latin American currencies strengthened against the dollar as weaker-than-expected US jobs data reduced the 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, lowered bets of a hike to 17%, 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 <=USD> 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 <.MILA00000CUS> rose 0.2%, though it was still heading for a third straight week of declines. Its stocks equivalent .MILA00000PUS jumped 1.9%, on track for its biggest one-day jump in a month, setting it up for weekly gains.

Data from J.P. Morgan showed retail outflows from EM bond funds increased to $930 million this week from $104 million, while outflows from EM equity funds decreased to $1.8 billion from $2.1 billion over the same period.

Mexico's peso rose 0.6%, though it remained near its weakest levels since December 2025.

The International Monetary Fund said greater efforts are needed to put Mexico's debt on a declining trajectory, even as fiscal consolidation continues in 2026.

The Colombian peso gained the most among its peers, up 1.4%, while Chile's peso weakened 0.4%.

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 within the margin of error at 2 percentage points, a Datafolha poll showed on Thursday.

Fiscal concerns remain at the forefront, with hopes that a Bolsonaro victory could pave the way for reforms aimed at improving public finances while a Lula win could be tied to 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.

Brazilian stocks .BVSP jumped 2.5%, with Petrobras up 2.7% and Bradesco gaining 3.2%.

Mexican equities .MXX advanced 1.3% with miner Grupo Mexico GMEXICOB.MX adding 3.7%.

Argentina's economy minister Luis Caputo announced on X that the country will launch South America's first citizenship-by-investment program.

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 1950 GMT