EMERGING MARKETS-Brazil’s real barely budges after election

* Brazil’s real loses 0.3 pct, Mexican peso flat

* Presidential election seen as having little effect

* Chile’s markets closed for a national holiday
(Adds closing prices)

By Samantha Pearson and Caroline Stauffer

SAO PAULO/MEXICO CITY, Nov 1 (BestGrowthStock) – Brazil’s real
lingered around its previous closing level on Monday, the day
after Dilma Rousseff of the ruling Workers’ Party won the
country’s presidential election.

In her victory speech, she vowed to maintain job and credit
growth, encourage Brazilians to save more and maintain
discipline in the government budget. [ID:nN01120007]

The Brazilian real (BRBY: ) opened slightly stronger but
later closed 0.29 percent weaker at 1.706 reais per U.S. dollar
on the local spot market as investors adopted cautious
positions ahead of a national holiday.

Analysts said the move was largely in line with the rest of
global markets. Many emerging market currencies also firmed
early on Monday due to strong Chinese factory data but later
pared gains as the dollar recovered. [ID:nTOE6A0044]

The presidential election has largely been considered a
“non-event” on trading floors across the world. Rousseff, who
had been widely expected to win, is likely to continue the
current economic policies that have transformed Brazil into one
of the world’s hottest emerging markets. [ID:nN01120007]

“It’s having absolutely no effect. Dilma was already priced
into the market. This is not news,” said Rodrigo Nassar, head
of trading at brokerage Hencorp Commcor in Sao Paulo.

But parts of Rousseff’s victory speech did catch the
attention of some analysts.

“She gave the impression in her speech that she might
follow more aggressive economic policies, that she would take a
harsher line against the appreciation of the real,” said Andre
Perfeito, an economist at Gradual Investimentos in Sao Paulo.

Brazil introduced a series of tax increases last month in
an effort to curb a rally in the real that is hurting exporters
and widening the current account deficit.

Intervention in the futures market via so-called reverse
currency swaps may be the next step, said analysts at HSBC in a
research note.

“Rousseff’s resounding victory – and the reaffirmation of
current policies – could make the central bank feel more
comfortable about reconsidering this option,” they wrote.

The speech also included some tough talk about government
spending, which some traders took as a sign that interest rates
may eventually drop under her watch. [ID:nN01259153]

But investors will be reluctant to make any hard bets on
the new government until it becomes clear who will make up
Rousseff’s economic team, said Gradual’s Perfeito.

Others said the speech gave few clues about what lies
ahead. “She indicated nothing, she gave absolutely no sign of
any type of (currency) intervention,” said Commcor’s Nassar.
“It’s way too early to speculate about this.”

EYES ON THE FED

Trading volumes were low on Monday, one day ahead of a
public holiday in Brazil. Given that Rousseff’s victory was
largely expected, many investors extended their weekend and
took Monday off.

Volumes were also down across the region because of public
holidays in Chile on Monday and in Mexico on Tuesday.

The Mexican currency (MXN=: ) traded flat at 12.3455 per
dollar.

The dollar has suffered heavy losses recently, boosting
many currencies around the world, as investors prepare for a
fresh round of monetary easing in the United States.

The Federal Reserve is expected to announce a round of
asset-buying this week, which should keep returns on U.S.
Treasuries close to record lows and encourage investors to buy
more of Latin America’s higher-yielding debt.

Brazil is likely to be a prime target given that the
country’s benchmark interest rate of 10.75 percent is one of
the highest in the world.

(Editing by Chizu Nomiyama)

EMERGING MARKETS-Brazil’s real barely budges after election