EMERGING MARKETS-Brazil real slumps after cenbank keeps rates unchanged
By Bruno Federowski SAO PAULO, Jan 21 (Reuters) - The Brazilian real slumped as much as 1.7 percent on Thursday after the central bank surprised many investors and held its benchmark interest rate, sending the currency to nearly all-time lows. Hours before the central bank rates decision late on Wednesday, interest rates futures markets indicated a high probability of a 25 basis-point increase. A Reuters poll also showed most economists expected an interest rate rise aimed at curbing inflation. Until early this week, most traders bet on a 50 basis-point increase in the Selic rate to 14.75 percent. Many trimmed their bets the bank chief Alexandre Tombini said on Tuesday he would take in account downward revisions to the country's growth outlook in the rate decision. "The bank can make an argument that rate hikes would only choke off the economy more without doing much to limit inflation," analysts with Brown Brothers Harriman wrote in a client note. "However, we think the bank should have hiked in order to maintain a shred of credibility, and we had held out hope for at least a token 25-basis-point hike. By not hiking at all, we think the bank has sacrificed its credibility beyond repair." Yields paid on short- and medium-term futures contracts in Brazil fell on Thursday, adjusting to the central bank's decision, while longer-term yields rose as traders bet the central bank could be forced to tighten policy even more in the future. The Brazilian real fell as low as 4.1723 per U.S. dollar, its weakest since its record low of 4.2482 on Sept. 24. It later slightly pared losses to 4.1566 for a 1.3 percent loss on the day. Other Latin American currencies inched up after European Central Bank President Mario Draghi said the bank will review its monetary policy in March, prompting bets on new stimulus. Gains were limited as oil prices remained close to 13-year lows, putting a cap on demand for commodity-linked currencies. The Chilean peso rose 0.2 percent, tracking a slight rise in copper prices, while the Mexican peso strengthened 0.1 percent. Latin American stock indexes and currencies at 1440 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 688.18 -0.66 -12.77 MSCI LatAm 1578.7 -0.13 -13.61 Brazil Bovespa 37806.97 0.43 -12.79 Mexico IPC 40722.9 -0.3 -5.25 Chile IPSA 3465.81 0.29 -5.83 Chile IGPA 17204.29 0.26 -5.22 Argentina MerVal 9486 0.9 -18.75 Colombia IGBC 8103.15 0.25 -5.20 Venezuela IBC 14490.87 0.12 275.53 Currencies daily % YTD % change change Latest Brazil real 4.1639 -1.47 -36.18 Mexico peso 18.4988 0.09 -20.30 Chile peso 727.3 0.23 -16.62 Colombia peso 3388.95 0.11 -29.54 Peru sol 3.4461 -0.03 -13.55 Argentina peso (interbank) 13.5200 -0.15 -36.76 Argentina peso (parallel) 14.32 0.21 -2.23 (Editing by W Simon)
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