EMERGING MARKETS-Latam currencies extend gains as Fed stands pat on rates
(Adds market reaction to Fed rate decision) By Bruno Federowski SAO PAULO, Sept 21 (Reuters) - Latin American stocks and currencies extended gains on Wednesday after the U.S. Federal Reserve left rates unchanged and signaled that the pace of rate hikes could be slower than expected. The Brazilian real firmed 1.5 percent to as much as 3.2097 per U.S. dollar, its strongest in over a week. The Chilean peso posted its best daily gain since Sept. 6. The Fed repeated that the case for a rate increase had strengthened, but cut the number of rate increases it expected this year to one from two previously and forecast a less aggressive tightening over the next two years. "U.S. rates are going up soon but the cycle will be smaller than previously expected. That's good news for Brazil but traders are currently more focused in local fiscal prospects and the possibility of rate cuts at home," said Coinvalores strategist Paulo Nepomuceno. Keeping U.S. rates lower for longer would benefit risky emerging market assets, which tend to lure foreign capital with higher financial returns. The Mexican peso rose less than its peers, paring back losses to about 13 percent this year. Mexico's finance minister said there was no decision yet on whether the government would intervene to stem the currency's recent slide but that there would be a meeting next week to evaluate it. Most Latin American stocks and currencies were already higher before the Fed announcement as traders cheered an overhaul of the Bank of Japan's policies after years of unprecedented money printing proved ineffective. The BOJ will switch to targeting interest rates on government debt instead of setting a fixed amount of bonds to be purchased each month. The bank also committed to letting inflation overshoot its elusive 2 percent target. Nevertheless, Credit Suisse strategist Andrew Garthwaite said the move should be seen as more of a "tightening of policy than an easing." "The market does not believe the inflation target, and our economists are also extremely skeptical the BOJ will succeed in generating sustainable inflation," he wrote in a client email. Brazil's Bovespa benchmark stock index rose 0.4 percent, supported by a rise in shares of miner Vale SA . O Globo newspaper reported that the company would sell two-thirds of its fertilizer unit to Mosaic Co for $3 billion. But gains were limited by falling shares of payment processor Cielo SA, after Goldman Sachs cut its price target for the stock. Key Latin American stock indexes and currencies at 1610: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 909.16 1.15 13.18 MSCI LatAm 2,372.86 1.17 28.17 Brazil Bovespa 57,948.79 0.37 33.68 Mexico IPC 46,747.99 0.88 8.77 Chile IPSA 4,071.34 0.2 10.63 Chile IGPA 20,263.52 0.21 11.64 Argentina MerVal 16,124.60 0.69 38.11 Colombia IGBC 9,855.09 -0.01 15.30 Venezuela IBC 12,044.68 -1.65 -17.44 Currencies Latest Daily YTD pct pct change change Brazil real 3.2113 1.50 22.91 Mexico peso 19.7500 0.32 -12.76 Chile peso 664.8 0.90 6.75 Colombia peso 2,894 0.71 9.51 Peru sol 3.367 0.65 1.40 Argentina peso (interbank) 15.1400 0.03 -14.25 Argentina peso (parallel) 15.63 0.83 -8.70 (Reporting by Bruno Federowski; Editing by Peter Cooney)
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