EMERGING MARKETS-Latam currencies steady ahead of Fed; Brazil real slumps on Fitch
SAO PAULO, Dec 16 (Reuters) - Latin American currencies steadied on Wednesday before an expected U.S. interest rate increase, while Brazil's real slumped after Fitch Ratings became the second agency to cut the country's debt rating to junk. Fitch cut Brazil's rating to BB+ with a negative outlook, saying impeachment proceedings against President Dilma Rousseff heightened political risks amid a deepening recession. Standard & Poor's had stripped the country of its investment grade in September, while Moody's Investor Service said last week it was considering doing the same. "It was a done deal; Fitch won the race. Now Moody's is just embarrassed to be late to the party," said Pedro Tuesta, an economist with 4Cast in Washington D.C. The real hit its lowest in two months after the announcement but recovered partially as many traders were already prepared for a second downgrade to junk. The currency tumbled about 2 percent after the Brazilian government decided to cut a key fiscal goal for next year, despite protests from Finance Minister Joaquim Levy. Levy has spearheaded the government's efforts to rein in spending as it tries to regain investor confidence and fight a deepening economic downturn. Local media reports said he had threatened to leave his post if the target was reduced. Investors worried that the move could usher in a return to the interventionist policies left-leaning Rousseff pursued over her first term. In other trading, the Mexican peso weakened 0.2 percent, while the Colombian peso rose 0.2 percent despite a drop in oil prices. Investors braced for what is expected to be the first U.S. Federal Reserve hike in benchmark rates in almost a decade. Although this could spell bad news for high-yielding emerging market assets, traders hope the central bank will stress its intention of tightening policy slowly over the following months. Latin American stock indexes and currencies at 1610 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 789.66 1.32 -18.5 MSCI LatAm 1860.62 -0.46 -31.47 Brazil Bovespa 44544.97 -0.73 -10.92 Mexico IPC 43301.88 0.92 0.36 Chile IPSA 3599.77 0.83 -6.52 Chile IGPA 17772.88 0.71 -5.82 Argentina MerVal 11851.13 -3.7 38.14 Colombia IGBC 8287.31 1.26 -28.77 Venezuela IBC 14411.28 -0.41 273.47 Currencies daily % YTD % change change Latest Brazil real 3.9501 -1.92 -32.72 Mexico peso 17.1455 -0.21 -14.01 Chile peso 708 0.42 -14.35 Colombia peso 3312.78 0.07 -27.92 Peru sol 3.3691 0.12 -11.58 Argentina peso (interbank) 9.8225 -0.18 -12.95 Argentina peso (parallel) 14.43 0.76 -2.98 (Reporting Bruno Federowski; Editing by Dan Grebler)
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