November 18, 2016 / 1:55 AM / 3 years ago

EMERGING MARKETS-Mexican peso falls despite rate hike, Fed action looms

(Updates with final prices after Mexican rate hike)
    By Bruno Federowski
    SAO PAULO, Nov 17 (Reuters) - Mexico's peso fell on Thursday
after an interest rate increase by the central bank fell short
of expectations for stronger action to counter a slide in the
currency sparked by Donald Trump's U.S. presidential election
win.
    The peso dipped 1 percent after the 50-basis-point rate
increase by the central bank. The hike was in line with a
Reuters poll of economists earlier in the week, but by Thursday
the market was tilting toward a bigger rate increase.
    "The market was expecting a bit more," said Alfonso Esparza,
a strategist at Oanda in Toronto, who still thought the
50-basis-point hike was the right move because of the risk to
growth from Trump's threat to unwind a free trade deal with
Mexico.
    "It is still very early to know what could be the effect of
the new policies of President-elect Trump," he said. "The
central bank could end up risking too much before it really
knows what will happen with Trump's promises." 
    Elsewhere, comments by Federal Reserve Chair Janet Yellen
that the U.S. central bank could tighten monetary policy
"relatively soon" cemented bets on a December rate hike and
helped send Brazil's stock market and the Colombian peso lower.
    The words were Yellen's first public remarks since the
election of Trump as U.S. president last week.
    Trump's pledges of heavy spending and lower taxes have
raised concerns that price pressures could force the Fed to
increase rates more quickly than previously expected.
    Higher U.S. rates would reduce the allure of high-yielding
emerging market assets, possibly triggering outflows.
    Brazil's benchmark Bovespa stock index fell by more
than 1.6 percent and shares in state-controlled oil company
Petróleo Brasileiro SA dipped over 3 percent.
        
    Key Latin American stock indexes and currencies at 2240 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
                                   Latest              
 MSCI Emerging Markets                847.19     0.04     6.68
 MSCI LatAm                          2272.61    -0.67     24.2
 Brazil Bovespa                     59770.47    -1.63    37.88
 Chile IPSA                          4185.71     0.08    13.74
 Chile IGPA                         20939.45     0.11    15.36
 Venezuela IBC                      26637.43     1.03    82.60
 Mexico IPC                         44919.69     0.04     4.52
 Currencies                                   daily %    YTD %
                                               change   change
                                      Latest           
 Brazil real                          3.4189     0.08    15.45
 Mexico peso                          20.430    -1.05   -15.66
 Chile peso                           675.00    -0.03     5.14
 Colombia peso                        3157.6    -0.77     0.37
 Peru sol                              3.404     0.00     0.29
 Argentina peso (interbank)           15.475     0.13   -16.11
                                                       
 Argentina peso (parallel)             15.63     0.19    -8.70
                                                       
 

 (Reporting by Bruno Federowski; Editing by Daniel Flynn and
Peter Cooney)
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