*

Brazil cuts rates by 50 bps, may change course after May

*

Mexico policy decision due

By Ankika Biswas

March 21 (Reuters) - Latin American currencies fell

against a strong dollar on Thursday after gains the previous day

on the Federal Reserve's unchanged 2024 policy outlook, while

Turkey's surprise rate hike boosted its international sovereign

bonds and the lira.

Chile's peso, Peru's sol and Colombia's

peso weakened between 0.3% and 0.9%, with the dollar

index gaining 0.5% and recouping Wednesday's losses after

Fed Chair Jerome Powell said recent high inflation readings had

not altered the central bank's stance as it stayed on track for

three interest rate cuts.

Juan Perez, director of trading at Monex USA, also pointed

to the Swiss National Bank's unexpected rate cut that likely

puts pressure on most developed economies to start easing and

also on emerging markets to further loosen their monetary

policy.

Meanwhile, Turkey unexpectedly raised interest rates by 500

basis points to 50%, citing a deteriorating inflation outlook

and pledged to tighten further if need be.

The lira firmed to 31.91 per dollar - its

strongest level since March 7 - after the decision, while

international dollar-denominated bonds extended their earlier

gains, with the 2038 bond chalking up the biggest increases.

The broader Istanbul stock market climbed more than

2% and the main Turkish bank stocks index jumped nearly

6%.

"With local elections coming up, very few were expecting a

rate rise. There has been a debate over how independent the

central bank can be from politics so this move is going to

reassure investors," said Cagri Kutman, Turkish market

specialist at KNG Securities.

Within Latam, Brazil cut its benchmark rate by 50 basis

points at a sixth straight policy meeting on Wednesday, while

flagging it may change the course of the current easing cycle

after May. The real fell 0.2%, in line with peers, to

4.98 per dollar.

"If USD/BRL rises further this year, it is likely to be on

weakening terms of trade, political uncertainty, and concerns

about the BCB's (Brazilian central bank's) eventual leadership

... These risks are not trivial, and USD/BRL could get to 5.30

at year-end," said Thierry Wizman, Global FX & Rates Strategist

at Macquarie.

Mexico's peso also fell 0.5% ahead of its policy

decision later in the day, widely expected to deliver its first

rate cut since mid-2021, although it may not start an aggressive

easing cycle.

Colombia's rate decision is due on Friday, with a Reuters

poll showing analysts expect the central bank to slash rates by

twice as much as in previous months.

Key Latin American stock indexes and currencies at 1415 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1047.87 1.53

MSCI LatAm 2537.28 0.29

Brazil Bovespa 128756.97 -0.28

Mexico IPC 56815.97 0.35

Chile IPSA 6562.00 0.93

Argentina MerVal 0.00 0

Colombia COLCAP 1303.35 -0.41

Currencies Latest Daily %

change

Brazil real 4.9841 -0.21

Mexico peso 16.7549 -0.49

Chile peso 972.2 -1.01

Colombia peso 3881.36 -0.32

Peru sol 3.6906 -0.25

Argentina peso (interbank) 854.0000 -0.06

Argentina peso (parallel) 1010 1.98