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Mexican peso recoups some losses

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Brazilian real briefly hits six per dollar

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Latam FX down 1.3%, stocks slip 1.6%

(Updates with mid-session trading)

By Shashwat Chauhan and Pranav Kashyap

Nov 28 (Reuters) -

Brazil's real plunged to a historic low on Thursday, while

its benchmark bond yield surged, as a wave of selling swept

through the market following the government's unveiling of a

contentious income tax reform package.

The real tumbled 0.8% to 5.9842 per dollar. It

briefly hit the level of 6.0 after Finance Minister Fernando

Haddad's address on Wednesday.

Brazilian equities also extended losses, with

the index falling more than 1% to its lowest level in more than

three months.

The yield on Brazil's 10-year benchmark bond

rose to over a one-year high of 13.49%.

This drop in Brazilian assets comes after Brazil,

following weeks of delay,

revealed plans

on Wednesday to expand income tax exemptions for

lower-income earners while hiking taxes on higher earners. The

proposal also included intentions to curtail public spending in

the coming years.

The announcement triggered an exodus of investors from the

currency, which has now slumped approximately 2% in just 24

hours.

The uncertainty surrounding these fiscal measures

injected fresh volatility into Brazilian markets, as concerns

mount that the government may fall short of meeting the

stringent budget rules established last year to curb the rise of

public debt.

"The measures failed to live up to expectations and

reinforce the idea that political commitment to stabilizing the

public finances is lacking, said Jason Tuvey, deputy chief

emerging markets economist at Capital Economics.

"Brazil has too much domestic currency government debt,

stemming from too many tax exemptions and too much public

spending," said Hasnain Malik, head of equity research at

Tellimer Research.

On Thursday, Finance Minister Haddad sought to soothe market

jitters by stating that the reforms will be fiscally neutral and

analyzed by Congress in time to take effect in 2026.

Mexico's peso recouped some of this week's losses to

rise 0.7%. Mexico's President Claudia Sheinbaum said she and

U.S. President-elect Donald Trump had a friendly call and looks

to ease tariff tensions.

It had been jolted this week by U.S. President-elect Donald

Trump saying he would impose a 25% tariff on imports from Canada

and Mexico.

The Bank of Mexico's governing board expects that current

inflation dynamics may allow further adjustments to the

benchmark interest rate, minutes from the bank's November

monetary policy decision showed on Thursday.

MSCI's index for Latin American currencies

was down 1.3%, its lowest in more than three months.

The stock index slid 1.6%, touching its

lowest level in more than two years.

EM assets have experienced a torrid November as investors

mull the implications of Trump's policies on trade, tariffs and

immigration, with the possibility of a global trade war.

Chile's peso, Brazil's real and the Mexican peso are

amongst the worst performing EM currencies so far this year.

Chile's peso is down about 11% against the dollar, while the

Brazilian and Mexican currencies are down over 20%.

Markets in the United States were shut for the Thanksgiving

holiday.

HIGHLIGHTS

** Producer prices in Brazil rise 0.94% in October

Key Latin American stock indexes and currencies:

Stock indexes

Latest Daily % change

MSCI Emerging Markets 1079.9 -0.71

MSCI LatAm 2011.37 -1.58

Brazil Bovespa 125887.15 -1.4

Mexico IPC 50025.45 0.48

Chile IPSA 6587.13 0.12

Argentina MerVal 2221631.28 0.74

Colombia COLCAP 1397.65 0.01

Currencies Latest Daily % change

Brazil real 5.9842 -0.78

Mexico peso 20.4301 0.73

Chile peso 977.03 0.01

Colombia peso 4414.2 -0.7

Peru sol 3.744 0.11

Argentina peso (interbank) 1,009.0 -0.05

Argentina peso (parallel) 1,100.0 2.22