* Brazil’s service sector hits fresh record high in September * World leaders head to South America for summit * Mexico to simplify fiscal regime for state oil firm Pemex * MSCI Latam stocks index off 0.2%, FX dips 0.1% (Updated at 14:40 ET) By Pranav Kashyap and Johann M Cherian Nov 13 (Reuters) – Most Latin American currencies edged lower against a volatile dollar on Wednesday, yet the Mexican peso defied the trend as investors braced for the forthcoming budget announcement and a potential rate cut on Thursday. MSCI’s index tracking Latin American currencies dipped 0.1%, as the dollar see-sawed between marginal gains and losses after an in-line U.S. inflation report underscored the likelihood of an interest rate cut by the Federal Reserve in December. The greenback was close to a six-month high as markets priced in higher interest rates under an upcoming Donald Trump administration, whose fiscal, trade and immigration polices are seen as inflationary by analysts. The Mexican Peso firmed 0.46% against to the dollar. The currency was poised to snap a three-day losing streak. On Thursday, the Mexican government is set to unveil its budget for 2025, amid growing investor anxiety over the nation’s fiscal deficit, which is anticipated to soar to 5.9% this year —the highest it has been in several decades. President Claudia Sheinbaum announced a plan to simplify the fiscal regime for state oil firm Petroleos Mexicanos, in effort to boost the producer whose heavy debts have weighed on state coffers. Investors are also anticipating a 25 basis-point interest rate cut, along with the unveiling of the 2025 budget, both slated for Thursday. “These are the two factors (budget and rate decision) that will move the peso over the next few months. Investor will get a close look on how Mexico will behave this time are they going to adapt a more cautious approach or if they are going to continue cutting rates,” said Andres Abadia, Pantheon Macroeconomics’ chief Latin America economist. Meanwhile, Copper exporter Peru’s sol dipped 0.63%, tracking weak prices of the red metal. The country is also hosting the Asia-Pacific Economic Cooperation (APEC) forum that starts today through November 15. Although the formal agenda centers on financing energy transition, discussions are likely to pivot towards the implications of a potential Trump 2.0 presidency. Meanwhile, the Brazilian real gave up initial gains and weakened 0.87% after Brazil’s finance minister Fernando Haddad signals uncertainty over a fiscal package announcement this week. The real currency has weakened to multi-year lows against the U.S. dollar in recent weeks amid government hesitation to announce a fiscal package to stem a rapid rise in mandatory spending. The local central bank sold $4 billion in two dollar auctions with repurchase agreements after earlier cancelling a similar scheduled operation due to technical issues. Separately, data revealed stronger-than-expected growth in services activity in September, further bolstering the case for upcoming interest rate hikes by the domestic central bank. Fellow copper producer Chile’s peso was trading flat after three sessions of declines, while oil exporter Colombia’s peso depreciated 0.78%, hitting its lowest level in over a year, as crude prices dipped. On the stocks front, an index tracking bourses in the region dropped 0.3%, with heavy-weight Brazilian equities trading flat. Mexican stocks lost 0.46% and was set to mark its fourth day in the red, while Colombia’s Colcap index lost 1.27% Key Latin American stock indexes and currencies: Latin American market prices from Reuters Equities Latest Daily % change MSCI Emerging Markets 1093.72 -0.86 MSCI LatAm 2096.08 -0.27 Brazil Bovespa flat 127608.39 Mexico IPC 50858.30 -0.5 Chile IPSA 0.7 6558.50 Argentina Merval 2045221.1 1.59 9 Colombia COLCAP 1328.56 -1.27 Currencies Latest Daily % change Brazil real 5.80 -0.87 Mexico peso 20.49 0.46 Chile peso 984.8 0.05 Colombia peso 4479.25 -0.78 Peru sol 3.81 -0.63 Argentina peso (interbank) 998 flat Argentina peso (parallel) 1120 flat (Reporting by Pranav Kashyap and Johann M Cherian in Bengaluru; Editing by Toby Chopra and Nick Zieminski)
