July 26, 2017 / 5:07 PM / a year ago

EMERGING MARKETS-LatAm currencies inch up ahead of Fed rate decision

    By Bruno Federowski
    SAO PAULO, July 26 (Reuters) - Most Latin American
currencies edged higher on Wednesday as investors stuck to bets
the Federal Reserve will stand pat on interest rates later in
the day.
    Money markets suggest traders are all but certain the Fed
will refrain from hiking rates following a batch of
weaker-than-expected U.S. economic data.
    But its policy statement could provide valuable information
for those seeking to determine when the U.S. central bank will
likely raise rates again and begin unraveling its bond holdings.
    The Fed's path toward normalizing monetary policy following
a series of unconventional easing measures in the aftermath of
the 2007-2009 financial crisis is likely to steer capital away
from high-yielding emerging markets and has been a key driver of
currency moves this year.
    Currencies from Brazil, Mexico, Chile and Colombia firmed
between 0.1 and 0.4 percent as traders avoided making risky
moves ahead of the Fed decision.
    Trading in Brazil's currency and interest-rate futures
markets was limited, ahead of an interest rate decision by the
country's central bank due to be announced after the market
close. The bank is widely expected to cut the benchmark Selic
rate by an aggressive 100 basis points to 9.25 percent. 
    Brazil's benchmark Bovespa stock index slipped 0.7
percent as traders feared the government could cut its fiscal
target this year as a slower-than-expected economic recovery
curbed fiscal revenues.
    Those concerns gained further impetus after a judge
suspended a large fuel tax increase announced last week, taking
away one option for covering the country's budget gap.

    "Fiscal difficulties, political risks and the new threat of
a downgrade if the government misses its fiscal target are
reason enough to take a defensive stance," Lerosa Investimentos
analyst Vitor Suzaki said.
    Key Latin American stock indexes and currencies at 1645 GMT:
 Stock indexes                                daily %   YTD %
                                               change  change
 MSCI Emerging Markets               1063.05     0.13   23.13
 MSCI LatAm                          2731.69    -0.37   17.14
 Brazil Bovespa                     65193.02    -0.72    8.24
 Mexico S&P/BVM IPC                 51621.79    -0.18   13.10
 Chile IPSA                          5027.50    -0.12   21.10
 Chile IGPA                         25118.62    -0.09   21.15
 Argentina MerVal                   21211.84    -0.15   25.38
 Colombia IGBC                      10914.76    -0.24    7.77
 Venezuela IBC                     134583.50        0  324.48
 Currencies                                   daily %   YTD %
                                               change  change
 Brazil real                          3.1605     0.20    2.81
 Mexico peso                         17.7525     0.07   16.85
 Chile peso                            648.2     0.22    3.47
 Colombia peso                       3017.49     0.42   -0.53
 Peru sol                              3.248     0.06    5.11
 Argentina peso (interbank)          17.4925     0.04   -9.25
 Argentina peso (parallel)             18.15    -0.06   -7.33
 (Reporting by Bruno Federowski; Editing by Tom Brown)
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