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Chile interest rate decision awaited

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Brazil's government raises FY primary deficit estimate

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Latam stocks index down 1.8%, FX off 0.8%

(Updated at 1942 GMT)

By Shashwat Chauhan and Johann M Cherian

May 22 (Reuters) - Most currencies and stocks in

resources-rich Latin America slid on Wednesday as commodities

prices took a hit, while Chile's peso was on track for its

biggest one-day drop in eleven months, ahead of a local monetary

policy decision.

Chile's peso, the currency of the world biggest

copper producer, shed 2.1% against the dollar, with prices of

the red metal under pressure as funds locked in profits from a

rally to record highs.

Later in the day, Chile's central bank is widely expected

cut its interest rate by 50-basis points to 6%. The bank slashed

the rate by 75-bps at its last meeting.

"Inflation has been higher than expected so far this

year. However, recent global shocks are very supportive of the

Chilean currency, including a large jump in copper prices and

the recent rally in U.S. rates," said Sebastian Rondeau,

southern cone & Venezuela economist at Bank of America

Securities.

"This led to a substantial appreciation of the CLP that will

facilitate the inflation fight and support further interest rate

cuts. The economy is recovering but private consumption is

lagging."

Chile's peso has jumped over 5% month-to-date,

outperforming regional peers as copper prices surged over the

past few sessions on signs of policy support by top consumer

China for its ailing property sector.

MSCI's gauge for Latin American currencies

dropped 1.8%, on track for its worst session in over three

weeks, with Brazil's real dipping 0.6%.

Currencies of oil-producing nations Mexico's and

Colombia slipped 0.4% and 0.1% respectively, as crude

prices slid over 1%.

Meanwhile, the dollar index firmed 0.2%, as minutes

from the latest U.S. Federal Reserve meeting showed that

policymakers they acknowledged disappointment over recent

inflation readings, but still had faith that price pressures

would ease, if only slowly.

On the equities front, MSCI's index for Latin American

equities lost 1.8%, hitting over a three-week

low.

Brazil's Bovespa fell around 1.4% with financial

stocks among biggest losers.

A Reuters poll showed, Brazilian shares will likely rise

less than previously expected this year due to heightened

investor wariness over moves to increase government influence in

the country's biggest companies.

Yield on Brazil's 5-year sovereign bond ticked up

2 basis points to 11.4%. The local government raised its primary

deficit forecast for this year to 14.5 billion reais, up from a

deficit of 9.3 billion reais estimated earlier.

Colombia's benchmark index was down nearly 2%, on

track for its biggest drop in over a month, while Mexico's

and Peru's main stocks indexes lost around 2%

each.

Key Latin American stock indexes and currencies:

Latin American market prices from

Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1094.59 0.11

MSCI LatAm 2438.85 -1.83

Brazil Bovespa 125617.78 -1.41

Mexico IPC 56329.80 -0.76

Chile IPSA 6730.72 0.3

Argentina MerVal 1571602.22 -0.601

Colombia COLCAP 1412.79 -1.94

Currencies Latest Daily %

change

Brazil real 5.1538 -0.74

Mexico peso 16.6648 -0.27

Chile peso 909.2 -2.42

Colombia peso 3831.69 -0.37

Peru sol 3.7249 -0.19

Argentina peso 889.5000 0.00

(interbank)

Argentina peso 1255 -1.99

(parallel)