EMERGING MARKETS-Brazil's real weakens on interest rate outlook

Thu Jul 17, 2014 11:45am EDT

SAO PAULO, July 17 (Reuters) - The Brazilian real weakened
the most in over two weeks on Thursday after a central bank's
policy statement upped investor expectations that interest rates
are unlikely to rise in the near-term.
    Most other Latin American currencies and stock indexes fell
modestly, in line with a drop in risk appetite fueled by fresh
U.S. and European Union sanctions against Russia and
weaker-than-expected U.S. housing data.
    Brazil's central bank held interest rates at 11 percent late
Wednesday, saying in its policy statement that the decision was
taken "at this moment." Some investors took that phrase as a
signal that the bank will maintain or even lower interest rates
in the near term to help juice an economy that is expected to
grow just 1 percent this year. 
    "It seems like the worry over weak economic activity is
weighing on the central bank's conscience," said Paulo Celso
Nepomuceno, fixed-income strategist with brokerage Coinvalores
in Sao Paulo.
    Yields on Brazilian interest rate futures <0#DIJ:> mostly
fell, with the most-traded January 2015 contract 
dropping 3 basis points to 10.73 percent.
    Brazil's real  followed suit, weakening 0.85
percent to 2.24 per dollar. 
    Local stocks also sank, with Brazil's benchmark Bovespa
index driven lower by shares of the most widely-traded
banks and commodities firms, which tend to attract a higher
proportion of foreign investors and track global risk appetite.
    Shares of planemaker Embraer SA reversed early
losses to gain about 1.5 percent after Brazil's government
announced the sale of 60 jets to China. 
    Chile's IPSA index was little changed while the peso
 weakened after the central bank on Tuesday cut its key
interest rate to 3.75 percent to spur slowing economic growth.
    Chilean markets were closed on Wednesday for a local
holiday. 
    
    Key Latin American stock indexes and currencies at 1525 GMT:
    
 Stock indexes                   daily %    YTD %
                                  change   change
                      Latest              
 MSCI Emerging          1061.14    -0.53      6.4
 Markets                                  
 MSCI LatAm             3437.45    -1.12     8.61
                                          
 Brazil Bovespa        55340.72    -0.68     7.44
                                          
 Mexico IPC            43914.89    -0.21     2.78
                                          
 Chile IPSA             3963.42    -0.02     7.14
                                          
 Chile IGPA            19291.78     0.03     5.84
                                          
 Argentina MerVal      8511.159    -0.43    57.88
                                          
 Colombia IGBC         13855.18    -0.03     6.00
                                          
 Peru IGRA             16872.99     0.12     7.11
                                          
 Venezuela IBC          2117.98        0   -22.60
                                          
                                                 
 Currencies                      daily %    YTD %
                                  change   change
                         Latest           
 Brazil real             2.2401    -0.84     5.21
                                          
 Mexico peso             12.939    -0.19     0.70
                                          
 Chile peso               563.5    -1.08    -6.64
                                          
 Colombia peso           1869.2    -0.07     3.36
                                          
 Peru sol                 2.795    -0.32    -0.07
                                          
 Argentina peso          8.1525     0.03   -20.36
 (interbank)                              
                                          
 Argentina peso           12.25     0.00   -18.37
 (parallel)                               
                                          
 
        

 (Reporting by Bruno Federowski; Writing by Asher Levine;
Editing by Chizu Nomiyama)
 
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