June 17, 2014 / 4:00 PM / 4 years ago

EMERGING MARKETS-Latam currencies weaker on U.S. data; Argentina debt plan eyed

SAO PAULO, June 17 (Reuters) - Latin American currencies
weakened on Tuesday after U.S. inflation data bolstered the
outlook for higher interest rates in the world's largest
economy, though trading volume was low in Brazil due to a
shortened session.
    The MSCI Latin American stock index sank for
the fourth straight day, weighed down by concerns over
escalating violence in Iraq.
    Data on Tuesday showed U.S. consumer prices recorded their
largest increase in more than a year in May. The data comes
ahead of the U.S. Federal Reserve's next policy decision,
scheduled for Wednesday.
    "It's not that the market is expecting the Fed to announce
anything tomorrow, but they could note that the economy
accelerated or that there is inflationary pressure, which ups
the chances that a rate hike will be bigger or come sooner than
expected," said Paulo Celso Nepomuceno of Sao Paulo brokerage
    Every major currency weakened against the dollar, with
Brazil's real dropping the most in over two weeks and the
Chilean peso sinking its most in nearly a month. 
    Brazil's currency market will close at 1 p.m. (1600 GMT) 
while the Bovespa stock exchange will cease trading at
1:30 p.m. as Brazilians prepare to watch the national soccer
team play Mexico in a 4 p.m. World Cup match.
    Argentine stocks and bonds continued to fall a day after the
U.S. Supreme Court left intact lower court rulings that ordered
Argentina to pay holdout creditors. These creditors declined to
accept the government's settlement after a 2001 default.
    Argentina warned the U.S. decisions could lead to a default
on its exising sovereign debt. Economy Minister Axel Kicillof
will announce later on Tuesday what Argentina plans to do in
response to the ruling. 
    "The most logical reaction is to reiterate their willingness
to pay," wrote Siobhan Morden, head of Latin America strategy at
Jefferies, in a client note. "The delay tactics may expire if
the stay of execution is not extended for a re-hearing request
and it already looks like both parties recognize that the legal
process is over." 
    The black market Argentine peso fell to its weakest
since early February, while the Merval stock index
dropped to its lowest level in a month.
    Argentina's U.S. dollar-denominated 2017 Global bond
 fell nearly 6 points to 82.79 bid with the yield
rising to 16.33 percent, according to Thomson Reuters data.
    The U.S. dollar-denominated 2033 Discount bond 
fell 2.26 points to bid 73 and yield 12.35 percent.

    Key Latin American stock indexes and currencies at 1521 GMT:
 Stock indexes                             daily %     YTD %
                               Latest       change    change
 MSCI Emerging Markets           1042,42     -0,37      4,35
 MSCI LatAm                      3342,16     -1,43      5,93
 Brazil Bovespa                 54223,28     -0,74      5,27
 Mexico IPC                     42568,67     -0,06     -0,37
 Chile IPSA                      3829,56      -0,3      3,52
 Chile IGPA                      18741,6     -0,29      2,82
 Argentina MerVal                7146,29     -1,22     32,56
 Colombia IGBC                  14242,06     -1,09      8,96
 Peru IGRA                      16255,88      0,01      3,19
 Venezuela IBC                    2154,4  #N/A        -21,27
 Currencies                                daily %     YTD %
                                            change    change
 Brazil real                      2,2565     -0,86      4,44
 Mexico peso                     13,1057     -0,48     -0,58
 Chile peso                        559,2     -0,72     -5,92
 Colombia peso                   1897,65     -0,46      1,81
 Peru sol                          2,803     -0,36     -0,36
 Argentina peso (interbank)       8,1300      0,00    -20,14
 Argentina peso (parallel)         12,35     -2,83    -19,03
 (Reporting by Asher Levine and Bruno Federowski; editing by
Andrew Hay)
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