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Fed decision eyed Wednesday

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Brazil's real falls past 5 to the dollar

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MSCI Latam FX index at lowest since March 4

(Updated at 3:50pm ET/1950 GMT)

By Sruthi Shankar and Lisa Pauline Mattackal

March 18 (Reuters) - Latin American currencies broadly

fell on Monday as the dollar firmed amid bets the Federal

Reserve will keep interest rates higher for longer, though stock

markets in the region got a lift from rising commodity prices

following upbeat data from top consumer China.

The MSCI index tracking Latin American currencies dipped

0.6%, falling to a two-week low.

Focus will be on the Fed's policy decision on Wednesday

after hotter-than-expected readings on U.S. inflation and the

labor market in recent weeks led investors to rein in bets of

big and quick interest rate cuts.

"Powell must reinforce that it is necessary to achieve

higher confidence in price stabilization to start a cycle of

interest rate cuts," analysts at StoneX said, referring to

Federal Reserve Chair Jerome Powell.

"If these expectations are confirmed, investors' risk

appetite will likely decrease, and the U.S. currency will

strengthen against other currencies."

The Brazilian real weakened past 5 per dollar for

the first time since Feb. 5 ahead of a domestic interest rate

decision later in the week, down 0.5% on the day.

Data showed economic activity in Brazil started the year

growing above expectations amid strength in the retail and

services sectors.

The Mexican peso and the Peruvian sol dipped

0.8% and 0.4% respectively.

Brazil's main Bovespa stock index was flat. Shares

of Embraer ( ERJ ) rose 1.5%, recovering from early losses

after the planemaker said it "continues to face challenges in

the supply chain."

Miner Vale climbed 1.9% as iron ore prices

rebounded after upbeat data in top consumer China renewed hopes

for a pick-up in steel demand in coming weeks.

"China's equities have stabilised reducing the risk of spill

over to emerging markets elsewhere," Jon Harrison, managing

director of EM Macro Strategy at TS Lombard wrote.

However, Harrison noted that while Asian emerging markets

remain well supported, politics and external risks curb Latin

American markets.

MSCI's index of Latin American stocks fell

0.6%, trailing a gauge of global emerging market stocks

which rose 0.3%.

Mexico-listed miner Grupo Mexico leapt over

7%, lifting Mexican stocks 0.3%.

Argentina's Merval index jumped 4% to lead gains in

the region. Energy company YPF shares were up nearly

7%.

Chile's economy experienced a slight expansion of 0.1% in

the fourth quarter of 2023 compared to the previous quarter,

data showed, a figure slightly below market consensus.

Chile's stock market slipped 0.1%, while its

currency lost 0.6% despite prices of copper, the country's

principal export, hitting 11-month highs.

Chile's peso is one of the poorest performing currencies in

the region, down over 7% against the dollar so far in 2024.

Key Latin American stock indexes and currencies at 1950 GMT:

Latest Daily %

change

MSCI Emerging Markets 1037.39 0.26

MSCI LatAm 2492.20 -0.62

Brazil Bovespa 126738.06 0

Mexico IPC 56228.40 0.3

Chile IPSA 6454.41 -0.14

Argentina MerVal 1116242.19 4.422

Colombia COLCAP 1307.14 1.72

Currencies Latest Daily %

change

Brazil real 5.0252 -0.01

Mexico peso 16.8262 -0.79

Chile peso 947.5 -0.59

Colombia peso 3892.27 -0.38

Peru sol 3.6887 -0.37

Argentina peso 852.0000 -0.12

(interbank)

Argentina peso 995 3.02

(parallel)