September 27, 2017 / 4:04 PM / a year ago

EMERGING MARKETS-LatAm currencies weaken on Yellen comments, Trump tax plan

    By Bruno Federowski
    SAO PAULO, Sept 27 (Reuters) - Latin American currencies
weakened on Wednesday as the market digested comments from
Federal Reserve Chair Janet Yellen which seemed to confirm that
further U.S. interest rate hikes are coming soon.
    In an address on Tuesday, Yellen said it would be
"imprudent" to keep rates on hold until inflation accelerates to
the U.S. central bank's 2 percent target.
    Her remarks added fuel to growing bets on a December rate
hike, apparently contradicting those who believed concerns over
the slow pace of inflation would lead the Fed to wait longer to
hike rates.
    U.S. President Donald Trump's plan to slash rates on
businesses and the wealthy could also speed up consumer price
increases, paving the way for tighter monetary policy.

    Higher U.S. rates often drain capital away from
higher-yielding, but riskier emerging markets, weighing on their
    "The tax plan could boost the American economy, bolstering
the U.S. dollar," said Pablo Spyer, director at brokerage Mirae
in Sao Paulo.
    The Brazilian real weakened as much as 1 percent,
breaching the threshold of 3.20 per dollar for the first time in
a month before paring losses.
    Currencies in Chile, Mexico and Colombia
 all slipped between 0.4 percent and 0.8 percent.
    Brazil's benchmark Bovespa stock index lost ground
for a fifth straight session as investors booked profits from a
recent rally that drove it to an all-time high earlier this
    Shares in Cia Energética de Minas Gerais SA shed
1.4 percent in volatile trading after Brazil's government sold
licenses to operate four hydropower dams previously operated by
Brazil's No. 3 power utility.
    Key Latin American stock indexes and currencies at 1525 GMT:
 Stock indexes                    Latest        Daily  YTD pct
                                                  pct   change
 MSCI Emerging Markets              1,077.66    -0.23    25.26
 MSCI LatAm                         2,883.83    -1.18    24.67
 Brazil Bovespa                    73,595.27    -0.97    22.20
 Mexico S&P/BVM IPC                50,004.66     -0.7     9.56
 Chile IPSA                         5,283.11     0.36    27.26
 Chile IGPA                        26,394.09     0.38    27.30
 Argentina MerVal                  25,108.75    -0.23    48.42
 Colombia IGBC                     11,094.55     0.35     9.54
 Venezuela IBC                    45,9729.72     6.46  1350.01
 Currencies                           Latest    Daily  YTD pct
                                                  pct   change
 Brazil real                          3.1864    -0.65     1.97
 Mexico peso                         18.0880    -0.75    14.68
 Chile peso                              637    -0.35     5.29
 Colombia peso                      2,940.81    -0.74     2.06
 Peru sol                              3.274    -0.12     4.28
 Argentina peso (interbank)          17.5800     0.00    -9.70
 Argentina peso (parallel)             18.02     0.17    -6.66
 (Reporting by Bruno Federowski, editing by G Crosse)
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