September 18, 2017 / 5:14 PM / 3 years ago

EMERGING MARKETS-LatAm currencies weaken ahead of Fed meeting

    By Bruno Federowski
    SAO PAULO, Sept 18 (Reuters) - Latin American currencies
weakened on Monday as traders focused on this week's meeting of
the U.S. Federal Reserve, which is expected to announce it will
begin trimming its massive portfolio.
    Investors widely bet that at the end of its two-day meeting
on Wednesday, the Fed will take its next step in winding down
the massive stimulus it introduced to fight the financial
    The U.S. central bank may also offer additional hints about
when it intends to raise interest rates again, after a string of
mixed economic data cast doubt over its plan to hike for a third
time this year.
    For years, high-yielding emerging market currencies have
benefited from steady investor demand as policymakers pumped
money into developed economies to bring borrowing costs down.
    That could fade in coming months as monetary policy returns
to pre-crisis standards, although most investors expect that
change to take place very slowly.
    "Luckily for emerging markets, global monetary policy
conditions remain amply accommodative in the form of low
interest rates by historical standards, and policy normalization
should be very gradual in the coming quarters," BNP Paribas
economists wrote in a report.
    The Brazilian real and the Mexican peso both
slipped 0.5 percent. Their moves echoed the U.S. dollar's
widespread climb in the wake of a rise in U.S. Treasury yields
    Brazil's benchmark Bovespa stock index, however,
rose past the 76,000 milestone for the first time as hopes that
President Michel Temer would implement market-friendly reforms
poured additional fuel onto last week's rally.
    Shares of miner Vale SA tracked iron ore prices
higher, adding the most points to the index. Steelmakers
followed along, with Usinas Siderúrgicas de Minas Gerais SA
 the index's biggest percentage gainer.
    JBS SA dropped 3.8 percent after the head of
state bank BNDES said the family calling the shots at the
world's largest meatpacker was unfit to run it. The Batista
family had named founder José Batista Sobrinho as chief
executive officer after his sons were charged with insider
    Key Latin American stock indexes and currencies at 1645 GMT:
 Stock indexes                              daily %    YTD %
                                             change   change
 MSCI Emerging Markets             1112.20     0.91    27.82
 MSCI LatAm                        2997.73     0.33    27.65
 Brazil Bovespa                   76012.64     0.34    26.21
 Mexico S&P/BVM IPC               50226.31     0.61    10.04
 Chile IPSA                        5202.05     0.81    25.31
 Chile IGPA                       25973.23     0.73    25.27
 Argentina MerVal                 23667.13     -0.2    39.89
 Colombia IGBC                    11163.48     0.04    10.22
 Venezuela IBC                   422995.69     6.42  1234.15
 Currencies                                 daily %    YTD %
                                             change   change
 Brazil real                        3.1279    -0.45     3.88
 Mexico peso                       17.7450    -0.48    16.90
 Chile peso                          624.9     0.00     7.33
 Colombia peso                     2908.37    -0.46     3.20
 Peru sol                            3.246     0.12     5.18
 Argentina peso (interbank)        17.0500    -0.41    -6.89
 Argentina peso (parallel)           17.83     0.06    -5.66
 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
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