EMERGING MARKETS-Latam currencies weaken as Fed policy minutes awaited
By Bruno Federowski SAO PAULO, May 18 (Reuters) - Most Latin American currencies weakened on Wednesday amid growing expectations that the Federal Reserve would increase U.S. interest rates relatively soon, drawing investment flows away from emerging market assets. Quickening inflation data and comments by Fed policymakers had revived those bets ahead of the release on Wednesday of the minutes of the U.S. central bank's most recent policy meeting. Nevertheless, interest rates futures contracts indicate traders remain skeptical about the two to three rate hikes this year eyed by some officials at the Fed. "The minutes are likely to reinforce a clear bias to normalization with discussions surrounding the timing of the next hike," Scotiabank strategists wrote in a client note. The Brazilian real fell more than its regional peers after the country's central bank sold $1 billion in reverse currency swaps, which correspond to dollar purchases in futures markets. The bank, which has bolstered its intervention policy as Brazil's political crisis triggered currency volatility, had remained on the sidelines for the last three days. Brazil's benchmark Bovespa stock index seesawed as U.S. shares turned positive in early trading, but a drop in shares of Cielo SA weighed on the index. Banco Santander Brasil SA cut its recommendation for the stock to "underperform," citing high stock prices and regulatory concerns. Shares of Eletrobras , which are not part of the index, slumped over 5 percent. The state-controlled electricity holding company's American Depository Receipts will be delisted after it missed a May 18 deadline to deliver its 20-F form, a requirement for foreign issuers listed in the United States. Centrais Elétricas Brasileiras SA, as the company is formally known, has said the documents were delayed by an internal investigation that is analyzing potential financial losses from a graft scheme involving local construction firms. Key Latin American stock indexes and currencies at 1440 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 794.53 -0.89 0.94 MSCI LatAm 2,130.09 -0.53 17.03 Brazil Bovespa 51,197.61 0.7 18.10 Mexico IPC 45,668.29 -0.44 6.26 Chile IPSA 3,961.67 -0.37 7.65 Chile IGPA 19,487.70 -0.32 7.36 Argentina MerVal 13,036.70 0.06 11.66 Colombia IGBC 9,936.61 -0.52 16.25 Venezuela IBC 14,957.04 3.69 2.53 Currencies Latest Daily YTD pct pct change change Brazil real 3.5272 -1.05 11.90 Mexico peso 18.3650 -0.46 -6.18 Chile peso 688.7 0.03 3.05 Colombia peso 3,026.62 -0.46 4.71 Peru sol 3.323 -0.36 2.74 Argentina peso (interbank) 14.1000 0.35 -7.93 Argentina peso (parallel) 14.61 0.48 -2.33 (Additional reporting by Paula Arend Laier; editing by Daniel Flynn and G Crosse)
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