October 29, 2019 / 8:29 PM / 17 days ago

EMERGING MARKETS-Latam FX sluggish as Fed, Brazil interest rate decisions awaited

 (Updates market price)
    By Sruthi Shankar and Susan Mathew
    Oct 29 (Reuters) - Most Latin American currencies made
little moves against the dollar on Tuesday ahead of a decision
from the U.S. Federal Reserve which is widely expected to cut
interest rates, with investors looking for signals on future
easing action.
    Chile's peso, down 0.5%, led declines among the
regional currencies as President Sebastian Pinera faced new
protests after he replaced eight cabinet members including his
interior and finance ministers to tame the biggest political
crisis since Chile's return to democracy in 1990.
    The Mexican peso and the Argentine peso held
steady, while the Brazilian real edged lower.
    Traders have priced in a quarter-percentage point rate cut
from the Fed after its two-day meeting on Wednesday, which would
make it the U.S. central bank's third rate cut this year.
However, investors are anxious about signals about its next
moves. 
    "We expect the Fed to guide market expectations toward the
view that the mid-cycle monetary policy correction is complete,"
wrote Jon Harrison, managing director of EM macro strategy at TS
Lombard, which will tend to strengthen the dollar against
emerging market currencies.
    Hopes of monetary stimulus from major central banks to
counter a slowdown in global growth, as well as easing in
U.S.-China trade tensions, have encouraged inflows into risky,
emerging market assets in the recent weeks. 
    A U.S. administration official said an interim trade
agreement between the United States and China might not be
completed in time for signing in Chile next month as expected,
but that does not mean the accord is falling apart.
    Wednesday will also see a decision on interest rates from
Brazil when policymakers are expected to cut the key rate by 50
basis points as they try to ignite growth and keep inflation
from falling further below target.
    "BRL is unlikely to be impacted by this policy
decision, though increased dovishness and a lower rate
trajectory will influence longer-term susceptibility to broad
dollar movements," said Sacha Tihanyi, deputy head of emerging
markets strategy at TD Securities.
    Argentina's peso closed slightly higher, with investors 
watching president-elect Alberto Fernandez for signals about his
potential policies on the economy, his approach to the country's
mountainous debt pile and the likely make-up of his key team of
advisors. The black market peso firmed 8.8%, a trader said.

    Fernandez has appointed a small transition team until his
government takes over in December, but there were no economists
in the group.
    Tracking a weakness in broader emerging market stocks
, most regional equities slipped between 0.7% and 2.9%.
    Bank stocks were the biggest decliners among Sao
Paulo-listed shares, while Argentine stocks fell for
second day in a row.
    Key Latin American stock indexes and currencies at 2000 GMT:
    
       Stock indexes                Latest      Daily %
                                                 change
 MSCI Emerging Markets               1042.61         -0.03
 MSCI LatAm                          2803.64         -1.05
 Brazil Bovespa                    107452.42         -0.68
 Mexico IPC                         43854.35           0.2
 Chile IPSA                          4880.87         -1.64
 Argentina MerVal                   32233.45        -2.844
 Colombia IGBC                      13241.44          0.44
                                                          
           Currencies               Latest      Daily %
                                                 change
 Brazil real                          4.0022         -0.27
 Mexico peso                         19.1240         -0.03
                                              
 Chile peso                              727         -0.54
 Colombia peso                       3373.05          0.21
 Peru sol                              3.336         -0.15
 Argentina peso (interbank)          59.4500          0.25
                                              
 
 (Reporting by Sruthi Shankar and Susan Mathew in Bengaluru;
Editing by Chizu Nomiyama and Alistair Bell)
  
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