EMERGING MARKETS-Latam currencies sink after Yellen remarks, stocks stable
(Recasts, updates prices, adds quotes) By Asher Levine SAO PAULO, March 19 (Reuters) - Latin American currencies reversed early gains on Wednesday after U.S. Federal Reserve chief Janet Yellen put investors on the lookout for higher interest rates in the world's largest economy. The Federal Reserve on Wednesday said it could keep interest rates at their current levels for "a considerable time" after its bond-buying stimulus program ends. When asked in a news conference to clarify, Yellen said it "means something on the order of around six months." "The market reacted immediately when (Yellen) came out and said there would be a six-month delay between when quantitative easing ends and Fed funds go higher," said Kathryn Rooney Vera, a strategist with Bulltick Capital Markets in Miami. "It seems a little bit more hawkish than the market was expecting to see, coming from someone as dovish as she is." Latin American currencies sank soon after Yellen's statements in expectation that a sooner-than-expected increase in U.S. rates would lead to an outflow of funds to U.S. assets. Brazil's real closed 0.32 percent lower against the dollar, while Mexico's peso posted its biggest daily loss in over six weeks. "We still see the peso as an outperformer in the emerging markets context, on account of the reform momentum and the economy's ties to the U.S.," wrote UBS analyst Rafael De La Fuente in an investor note earlier on Wednesday. "However, with the Fed tapering ongoing, and no major reform-related foreign direct investment expected in the short term, there is no clear catalyst for the currency to appreciate strongly in the short term." Chile's peso saw a muted drop, weakening 0.15 percent as dollar sales resulting from the expiration of unrenewed currency forward contracts lent support. Colombia's peso, which ended trading before the Fed announcement, notched its strongest rally in six months after investment bank J.P. Morgan said on Wednesday that it will boost the weighting of the country's peso-denominated debt in two closely followed emerging market bond indexes. The Colombian currency closed 1.02 percent higher at 2009.34 per dollar. Latin American nations are looking ahead at a period of weaker regional currencies, while the widespread growth model based on commodities exports is nearing a "plateau," an International Monetary Fund official said on Wednesday. The region's stock markets had a mixed reaction to the Fed statement and Yellen's comments, with the MSCI Latin American stock index giving up early gains to trade flat. Brazil's Bovespa index held onto its 0.94 percent gain, however, supported by a 3 percent advance in state-run oil firm Petroleo Brasileiro SA and a 4.6 percent jump in state-controlled lender Banco do Brasil SA. "Shares of state firms are a highlight today as there is talk that electoral polls are showing opposition candidates gaining on (incumbent President Dilma) Rousseff," said Rogerio Oliveira, an equities specialist at brokerage ICAP in Sao Paulo. Many investors have been critical of the Rousseff administration for heavy-handed government intervention in the private sector and policies that run against the interests of minority shareholders in state-controlled firms. Mexican shares were little-changed, while Chilean stocks nearly erased the previous session's gains, driven by a 2 percent drop in conglomerate Copec. Key Latin American stock indexes and currencies at 2009 GMT: Stock indexes daily % YTD % change Latest change MSCI Emerging Markets 947.66 -0.51 -5.01 MSCI LatAm 2911.8 -0.04 -8.99 Brazil Bovespa 46565.49 0.9 -9.59 Mexico IPC 38811.94 -0.01 -9.16 Chile IPSA 3633.66 -1.09 -1.77 Chile IGPA 17992.59 -0.86 -1.29 Argentina MerVal 5866.99 -0.28 8.83 Colombia IGBC 13029.02 0.02 -0.32 Peru IGRA 14455.76 -1.5 -8.24 Venezuela IBC 2588.21 0.29 -5.42 Currencies daily % YTD % change change Latest Brazil real 2.3480 -0.32 0.37 Mexico peso 13.273 -0.85 -1.83 Chile peso 568.5 0.09 -7.46 Colombia peso 2009.34 1.03 -3.85 Peru sol 2.813 0.00 -0.71 Argentina peso 7.9500 0.06 -18.33 (interbank) Argentina peso 10.88 0.46 -8.09 (parallel) (Additional reporting by Froilán Romero in Santiago and Priscila Jordao in Sao Paulo; Editing by Paul Simao)
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