Brazil's real leads Latam FX lower, eyes on China stimulus

Most currencies and equities in Latin America were flat to lower on Friday, with Brazil's real hitting a one-month low, as investors assessed U.S. data and awaited a fiscal stimulus announcement from top resources consumer China.

Brazil's real USDBRL weakened over 0.8% and was set for its biggest weekly drop in nearly two years, tracking a weekly drop in iron ore prices, the country's top export.

Worries about fiscal and monetary stability in the country have also weighed on the currency, making it the worst performing currency in the region this year.

Separately, services sector activity, a large contributor to the region's largest economy, unexpectedly fell in August, interrupting a two-month growth streak that had led the sector to reach a record high in July.

MSCI's index tracking currencies (.MILA00000CUS) slipped 0.1% against a steady dollar and was poised for weekly declines, as commodity exporter economies awaited top consumer China's fiscal stimulus.

The China's finance ministry is expected to deliver a press conference on Saturday.

Meanwhile, U.S. data showed producer prices were little changed in September, causing investors to cement expectations for a smaller interest rate reduction of 25 basis points by the Federal Reserve at its November meeting.

Peru's sol USDPEN was flat after slipping nearly 1% earlier in the session. The local central bank held the benchmark interest rate at 5.25% in a surprise move on Thursday.

"We expect that, if current trends in inflation and economic conditions persist over the next few months, there likely will be room for further cuts, potentially lowering the policy rate to 4.75% by year-end," said Andrés Abadía, chief LatAm economist at Pantheon Macroeconomics.

Bucking the trend, Mexico's peso USDMXN firmed 0.8% and was set to end the week flat against the greenback. Senators passed regulations stipulating how a judicial overhaul that reforms the country's constitution will be implemented to popularly elect judges.

Investors sold off the peso earlier this year on uncertainty over the implications of the judicial overhaul.

Copper producer Chile's peso USDCLP and oil exporter Colombia's peso USDCOP edged up 0.2% and 0.1% respectively.

On the equities front, MSCI's index tracking regional bourses (.MILA00000PUS) dipped 0.1% and was set for its biggest weekly drop since late July.

Brazil's Bovespa IBOV lost 0.4%, with consumer staples stocks among top drags.

Colombia's Colcap (.COLCAP) added 0.6% and Mexico's main index ME slipped 0.1%.

Key Latin American stock indexes and currencies: