Lima stock exchange collapses, dollar rises in Peru due to tight ballot

Peruvian sol plunges more than 2% to a record low amid high political uncertainty in the face of Sunday’s tight presidential elections, while shares on the Lima stock exchange are also falling significantly.

The peruvian currency operated at 10 a.m. local time (15 GMT) with a 2.24% decrease, to a new all-time low.

For its part, Lima stock market selective index plunges 5.9%. The financial, consumer, industrial, mining and construction sectors were the most affected.

“If Castillo is confirmed as president-elect, we believe the central bank would be on trial with regime change, possibly facing capital flight as a result of the election result.JPMorgan said in an analysis note.

“If the candidate for the continuation of the regime (Keiko) Fujimori ends up winning (…) we hope that financial conditions will normalize despite the political challenges that await us in a scenario of a highly polarized society.”

With around 93% of the votes counted, Keiko Fujimori, considered pro-market, had 50.1% of the preferences against 49.9% of left-wing candidate Pedro Castillo.

The previous all-time low of the sol was 3.8850 to the dollar, recorded on June 2, against the backdrop of losses due to the electoral uncertainty.

Any confirmation of a Fujimori victory could cause the sun to cut losses or even increase in the day.. The high of last Friday’s session at 3.78 per dollar could be a first hurdle if the currency advances.

The narrow margin of victory means that it is the loser is less likely to immediately admit defeat. The possibility of the votes being counted again and the outcome being challenged by law may limit the scope of the Sun’s wins even if Fujimori is declared the winner.

The currency rallied on Friday after Castillo’s top economic adviser pledged restraint in an interview, saying the candidate “by no means (would) be another Hugo Chávez”. The play could extend losses towards the key 4.00 level if Castillo is declared the winner and does not moderate his speech.

The central bank could intervene in the spot market and sell dollars. The bank sold $ 148 million last Tuesday, $ 60 million Wednesday and $ 93 million Thursday.

(With information from Bloomberg and Reuters)

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