December 15, 2016 / 11:08 PM / in 2 years

EMERGING MARKETS-Mexico peso firms after aggressive rate hike

(Recasts throughout, updates prices)
    SAO PAULO, Dec 15 (Reuters) - Mexico's peso strengthened on
Thursday after the country's central bank hiked its benchmark
interest rate more than expected in a bid to ease pressure on
the currency and slow inflation following the U.S. election
victory of Donald Trump.
    The Banco de Mexico hiked its benchmark interest rate
 by 50 basis points to 5.75 percent, above the
median forecast in a Reuters poll of economists, taking it to
its highest level since April 2009. 
    The peso reversed losses on the announcement,
before closing at 20.33 pesos per dollar, up about 0.7 percent.
    The central bank has raised rates five times this year,
lifting borrowing costs by a total of 250 basis points.
Policymakers on Thursday said the cumulative hikes would help
slow the quickening inflation trend by 2018.
    The move came a day after the Federal Reserve indicated it
would raise U.S. interest rates more times than expected next
year, potentially draining capital away from higher-risk
emerging markets.
    In a conference call after the decision, Fed Chair Janet
Yellen said the election of Donald Trump as president had put
the U.S. central bank under a "cloud of uncertainty," and
already prompted some policymakers to shift their view of what
is to come. 
    Trump has pledged to cut taxes but also to invest heavily in
American infrastructure, fostering expectations of stronger
price pressures and weakening emerging market currencies. The
outlook for increased economic activity and stronger 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, but ended the day up 1.2 percent at 3.37 reais per
    Brazil's benchmark Bovespa stock, which fell 1.8
percent after the Fed decision, rebounded 0.32 percent on
Thursday, boosted by shares of Usiminas, one of the
largest steelmakers in the Americas.
    Key Latin American stock indexes and currencies at 2115 GMT:
 Stock indexes               Latest    Daily pct   YTD pct
                                        change     change
 MSCI Emerging Markets         859.18      -1.56        9.9
 MSCI LatAm                  2,273.34      -1.22      25.78
 Brazil Bovespa             58,396.16       0.32      34.71
 Mexico IPC                 45,871.96      -0.75       6.73
 Chile IPSA                  4,224.62      -0.12      14.79
 Chile IGPA                 21,108.74      -0.12      16.29
 Argentina MerVal           16,738.59      -1.06      43.37
 Colombia IGBC              10,031.84       1.27      17.37
 Venezuela IBC              30,513.29      -6.34     109.16
 Currencies                  Latest    Daily pct   YTD pct
                                        change     change
 Brazil real                   3.3690       1.20      17.16
 Mexico peso                  20.3295       0.70     -15.31
 Chile peso                       666      -1.58       6.56
 Colombia peso                3,000.5      -1.30       5.63
 (Reporting by Bruno Federowski, additional reporting by Natalie
Schachar; editing by G Crosse)
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