May 18, 2016 / 2:57 PM / 2 years ago

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
    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
 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
 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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