EMERGING MARKETS-Brazil real slumps on Fitch, U.S. Fed boosts Mexican peso
(Updates prices) SAO PAULO, Dec 16 (Reuters) - Brazil's real slumped after Fitch Ratings became the second agency to cut the country's debt rating to junk, while the U.S. Federal Reserve's decision to raise interest rates for the first time in nearly a decade boosted Mexico's peso. Brazil's currency fell sharply after Fitch cut its rating to BB+ with a negative outlook, saying impeachment proceedings against President Dilma Rousseff heightened political risks amid a deepening recession. The real was down 1.23 percent to 3.9227 per dollar. The Brazilian currency tumbled after the country's 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. 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. Meanwhile, Mexico's peso reversed losses to gain 0.8 percent to close at 16.973 per dollar following the Fed interest rate hike, capping its best 6-day stretch in about three weeks. The peso has lost more than 15 percent this year due to fears a Fed rate hike could spur investors to dump emerging market assets. The currency has also been hit by the tumbling price of oil, which underpins Mexican government spending. Mexico's central bank is expected on Thursday to raise borrowing costs for the first time in more than seven years. The Fed raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs. The Colombian peso weakened 0.5 percent oil prices fell. Latin American stock indexes and currencies at 0100 GMT: Currencies daily % change Latest Brazil real 3.9227 -1.23 Mexico peso 16.973 0.80 Chile peso 708.4 0.37 Colombia peso 3332.29 -0.52 Peru sol 3.3681 0.15 Argentina peso (interbank) 9.8250 -0.23 Argentina peso (parallel) 14.52 -0.21 (Reporting Bruno Federowski and Miguel Angel Gutierrez; Editing by Dan Grebler and Ken Wills)
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