EMERGING MARKETS-Latam FX bounces after dollar falls on U.S. Fed's rate cut

By Shreyashi Sanyal

March 3 (Reuters) - Most Latin American currencies rose on Tuesday, as the U.S. dollar sank after the Federal Reserve cut interest rates in an emergency move to help the world's largest economy fight the blow from a fast-spreading coronavirus.

The U.S. central bank said it was cutting rates by half a percentage point to a target range of 1.00% to 1.25%, sending the dollar to a six-week low, before it pared losses.

"What the Fed did today was certainly positive for emerging market assets because it takes away a very strong support that the dollar had, which is yields," said Sacha Tihanyi, deputy head of emerging markets strategy at TD Securities. "This also sort of signals that there is an aggressive monetary easing stance on the Fed's mind."

Most emerging market currencies have been under pressure recently from fears of the global economic impact of the coronavirus outbreak, which drove investors away from riskier assets and into the perceived safety of gold, the U.S. dollar and Treasuries.

MSCI's index for Latin American currencies .MILA00000CUS rose 0.2%, but Brazil's real BRL= lagged its peers and touched all-time lows.

The Chilean CLP= and Colombian COP= pesos gained, and the Peruvian sol PEN= also firmed.

Economists at Goldman Sachs slashed their 2020 economic growth forecasts for Brazil and Mexico, citing the expected impact from the coronavirus.

"Central banks (in Latin America) could use the Fed's decision as an excuse to lower interest rates further, despite rising inflation, and we might see Banxico also respond with more cuts," said Jason Tuvey, senior emerging markets economist at Capital Economics.

Mexico's peso MXN= traded in a tight range against the dollar. The currency has fallen more than 2% in 2020 so far.

Argentina's peso ARS= eased as Health Minister Gines Gonzalez Garcia confirmed the South American country's first case of coronavirus.

Regional stocks fell, with Sao Paulo stocks .BVSPleading declines.

BRF SA BRFS3.SAslid 6.5% after the food processor said 2020 will likely be "a volatile" year given uncertainty related to grain prices, forex variations and epidemics like the new coronavirus.

Chile stocks .SPIPSA rose 0.1%, but gains were capped by a 14% tumble in shares of SQM SQMA.SN, the world's No. 2 lithium producer.

The company reported a slump in profits in the last quarter of 2019 and warned that early 2020 sales in China could be hit by the coronavirus. [nL1N2AW0EC]

Key Latin American stock indexes and currencies at 1929 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1026.13

0.89

MSCI LatAm .MILA00000PUS

2461.53

-0.76

Brazil Bovespa .BVSP

104962.28

-1.56

Mexico IPC .MXX

42608.80

1.05

Chile IPSA .SPIPSA

4288.76

0.12

Argentina MerVal .MERV

36060.59

-0.531

Colombia COLCAP .COLCAP

1529.42

-0.46

Currencies

Latest

Daily % change

Brazil real BRBY

4.5105

-0.55

Mexico peso MXN=D2

19.3856

0.07

Chile peso CLP=CL

807.1

0.68

Colombia peso COP=

3461.22

-0.04

Peru sol PEN=PE

3.422

0.56

Argentina peso (interbank) ARS=RASL

62.3075

-0.08

(Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Alistair Bell and Leslie Adler)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))

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