Softer dollar lifts Latam FX; S.African rand weighs on EM

Most Latin American currencies rose on Thursday, aided by weakness in the dollar, while a drop in the South African rand amid rising political uncertainty weighed on broader emerging markets.

Currencies in Latin America (.MILA00000CUS) rose 1.2%, outpacing the broader emerging market currencies index (.MIEM00000CUS), which added 0.8%.

The U.S. dollar index DXY tumbled 1% after comments by Federal Reserve Chair Jerome Powell that U.S. rate hikes could be scaled back "as soon as December" and as an indicator tracked by the Fed showed inflation moderating.

South Africa's rand USDZAR dropped 2.3% against the dollar, weighing on the EM index.

South African President Cyril Ramaphosa's future hung in the balance as his office said he was exploring options after a report found evidence he may have committed misconduct over a stash of cash stolen from his game farm.

"From a markets perspective, we believe that an early departure of President Ramaphosa will be perceived negatively by financial markets, given uncertainties about policy continuity that such an event would naturally bring," Barclays Bank strategists wrote in a note.

"Hence, against the uncertain political background over the next few weeks, we believe that markets are likely to remain volatile in the near term."

In Latin America, the Brazilian real USDBRL dipped 0.2%, after rising for three straight sessions.

Brazil's economic growth slowed more than expected in the third quarter as higher interest rates affected household spending, underscoring challenges facing President-elect Luiz Inacio Lula da Silva next year.

The real has underperformed its regional peers in November, ending last month nearly flat compared to the 1% rise in the broader Latam index on fiscal policy concerns.

Brazil's central bank intervened in the foreign exchange market on Thursday, selling $2 billion in the spot market with a repurchase agreement, it said in a statement on its website.

Lula has also pushed back his first Cabinet announcements to next week, two people familiar with the matter said on Wednesday, dragging out key appointments that have kept financial markets on edge.

Mexico's peso USDMXN rose 0.6%. Central bank data showed remittances to Mexico reached a record-high of $5.360 billion in October.

A survey showed Mexico's factory activity grew for a third straight month in November amid sales improvement, job creation.