December 15, 2016 / 12:56 PM / 2 years ago

EMERGING MARKETS-Latam currencies weaken as Fed signals faster rate hikes

By Bruno Federowski
    SAO PAULO, Dec 15 (Reuters) - Latin American currencies
weakened on Thursday after the U.S. Federal Reserve indicated it
would raise interest rates more times than expected next year,
potentially draining capital away from emerging markets.
    The central bank unanimously lifted its benchmark rate on
Wednesday as widely expected but surprised investors by
increasing the number of hikes anticipated for 2017 to three
from two. 
    In a conference call after the decision, Fed Chair Janet
Yellen said the election of Donald Trump as U.S. president had
put the central bank under a "cloud of uncertainty" and prompted
some policymakers to shift their view of what will come.
    Trump has pledged to invest heavily in infrastructure and
cut taxes, fostering expectations of stronger price pressures
and weakening emerging market currencies. The outlook for more
economic activity and higher demand for industrial metals has
also triggered a rally in U.S. stocks and commodity prices.
    The Brazilian real weakened as much as 2 percent on
Thursday, more than its Latin American peers. The nation's
currency markets were closed at the time of the Fed
    Brazil's benchmark Bovespa stock, which fell 1.8
percent after the Fed decision, extended losses on Thursday.
    The drop was limited by a 3.4 percent rise in shares of
Braskem SA, the biggest in over a week.
    Latin America's largest petrochemical producer signed a
leniency deal with Brazilian prosecutors leading a sweeping
graft probe into state-run oil company Petrobras, a
major Braskem supplier and shareholder. 
    In a client note, UBS Securities analysts said Braskem's
fundamentals were strong enough to trade at levels in line with
or above historical multiples following the 3.1 billion reais
($917 million) leniency agreement. 
    Key Latin American stock indexes and currencies at 1225 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets                858.93    -1.58      9.9
 MSCI LatAm                          2253.80    -2.07    25.78
 Brazil Bovespa                     57773.76    -0.75    33.27
 Chile IPSA                          4230.21     0.01    14.94
 Chile IGPA                         21160.18     0.12    16.58
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.3825    -1.51    16.69
 Mexico peso                         20.5920    -0.58   -16.33
 Chile peso                            662.5    -1.06     7.12
 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
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