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MSCI Latin American currencies down 0.7%, stocks fall 1.1%

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U.S. producer inflation rises more than expected in July

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Peru's interest rate decision due later in the day

(Updates with afternoon levels)

By Pranav Kashyap and Sukriti Gupta

Aug 14 (Reuters) -

Latin American currencies fell on Thursday, led by Chile's

peso, after stronger-than-expected U.S. producer price

data tempered expectations for a jumbo Federal Reserve rate

cut next month.

An index tracking Latin American currencies

slipped 0.7%, pressured by a gaining dollar index, while

a regional stocks gauge slipped 1.1%. Both were

on track for their worst day in more than two weeks.

U.S. producer prices rose 3.3% in July, above the 2.5%

consensus of economists polled by Reuters. Traders quickly

scrapped budding bets on a half-point Fed cut next month, while

continuing to price a 25-basis-point move.

"The reaction after the last CPI print was a rich

pricing in global equities, which is a clear path for a market

that was getting enthusiastic and pondering about the

possibility of a 50 bps cut," said Alejandro Cuadrado, global

head of FX and Latam strategy at BBVA.

"With the PPI, we got a bit of a reality check... there

is an impact of tariffs."

Chile's peso was down 1.4%, poised for its

biggest single day percentage drop in nearly three weeks, with

weaker copper prices also weighing on sentiment. Stocks in

Santiago, were flat but hovered near a record high

touched in the previous session.

Mexico's peso eased nearly 1% to a one-week low,

while the country's benchmark index lost 0.5%.

The Brazilian real slipped 0.3%, while the country's

stock index was little changed. Fresh data showed

services activity in Brazil grew 2.8% in June on an annual

basis.

Brazil faces some of the highest U.S. tariff rates,

complicating the central bank's path to monetary policy easing

as domestic inflation slows.

Reuters

reported

that Congressman Eduardo Bolsonaro said Brazil could face

additional U.S. tariffs due to legal action against his father,

former President Jair Bolsonaro.

The Argentine peso firmed 1.2%, but stocks in Buenos

Aires slid to a near three-week low, down 4.5%.

Colombia's peso declined 0.4%, while stocks

advanced 0.9%, tracking rising oil prices.

Peruvian sol dipped 0.6% in low volumes ahead of a

local central bank decision, where rates are expected to kept o

hold rates.

In Asia, India's bond yields logged their steepest decline

in three months after S&P Global Ratings upgraded the country's

long-term sovereign credit rating to "BBB" from "BBB-".

"We view this rating upgrade as unambiguously positive...

this should boost sentiment and potentially lower risk premia

and borrowing costs in the (Indian) economy," said analysts at

J.P.Morgan.

Broader emerging-market sentiment may hinge on an upcoming

summit between U.S. President Donald Trump and Russia's Vladimir

Putin.

Trump has warned of "severe consequences" if Putin rejects a

Ukraine deal, then signaled a fast follow-up with Zelenskiy,

easing worries about Kyiv being sidelined.

Ukraine's dollar bonds rose more than 1 cent on the

dollar.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1269.74 -0.57

MSCI LatAm 2320.57 -1.08

Brazil Bovespa 136517.65 -0.12

Mexico IPC 58174.01 -0.52

Chile IPSA 8735.92 -0.02

Argentina Merval 2185160.31 -4.47

Colombia COLCAP 1842.84 0.87

Brazil real 5.4152 -0.31

Mexico peso 18.8099 -1

Chile peso 964.68 -1.39

Colombia peso 4046.01 -0.43

Peru sol 3.5624 -0.62

Argentina peso (interbank) 1298 -1.77

Argentina peso (parallel) 1300 -0.38