The economic and foreign exchange crisis in Argentina and the growing uncertainties in the political scenario of Brazil ahead of October's presidential election also had an impact in the Brazilian currency and markets, forcing the Central bank to come out with a US$ 1.5bn support.
This helped the Brazilian currency which had slipped to 4.21 Reais to the US dollar, to recover and end trading at 4.14 Reais, which was 0.63% below the record exchange of 4.16 from 21 January 2016. It was also the first time the Brazilian central bank had intervened in the market since last 22 June.
The bank also announced that on Friday it will intervene in the market with US$ 2.15 billion with the purpose of rolling over short term debt maturing on 5 September, hopefully taking them to 5 November and 4 December.
Nevertheless despite all the turmoil and contagion from Argentina the Brazilian central bank is expected to keep the monetary policy and basic Selic interest rate, currently at 6.5%, until the beginning of 2019, since inflation seems under control and below target.
However is was not only Argentina influencing: in effect the situation in Turkey remains volatile with the Turkish Lira slipping 5% against the dollar and increasing rumors that the central bank vice president, Erkan Kilimci, could resign.
Furthermore electoral uncertainty in Brazil as to the results of the coming presidential election are having an impact, since those candidates considered market friendly and prepared to address much needed reforms, such as the ex governor of Sao Paulo state, don't seem to be taking off, according to the latest opinion polls. Also pending is a final ruling from the Electoral Superior Tribunal as to whether Lula da Silva will be finally barred from running for president next October.
Finally the index of Brazil's main stock market, Bovespa was down 2.53% in line with the poor performance of global markets.
In neighboring Uruguay, the central bank stabilized the local foreign exchange market selling 115 million dollars. The value of the dollar climbed one Peso, almost 1%, to 33 Pesos.