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EMERGING MARKETS-Latam FX dip as dollar comes off lows ahead of Fed outcome

Credit: REUTERS/RICARDO MORAES

Latin American currencies slipped on Monday, with Brazil's real giving up early gains, as the dollar came off session lows ahead of a Federal Reserve meeting later this week.

By Susan Mathew

June 17 (Reuters) - Latin American currencies slipped on Monday, with Brazil's real giving up early gains, as the dollar came off session lows ahead of a Federal Reserve meeting later this week.

The dollar steadied, hovering near the two-week highs hit earlier in the session, as investors reconsidered how dovish the Fed is likely to be after its two-day meeting set to end on Wednesday. FRX/

"We don't see preemptive cuts, leaving the Fed in wait-and-see mode," wrote Mark McCormick, global head of FX strategy at TD Securities, in a note.

"If the Fed can engineer a low-volume outcome this week that should reinforce the broad dollar," he said, which could hurt developing world currencies.

Mexico's peso MXN= deepened its declines. Rating agency Moody's said unpredictable policymaking by the Mexican government and challenges facing debt-laden state oil firm Pemex are clouding economic and fiscal outlook for Mexico. Moody's had lowered its outlook on Mexico to negative earlier this month.

Colombia's peso COP= touched its lowest in more than one week, while a recovery in copper prices helped stem losses in Chile's peso CLP=. Copper is Chile's main export. MET/LO/R

Brazil's real BRL= gave up early gains to trade 0.16% lower ahead of the country's central bank rate decision on Wednesday. The benchmark interest rate is expected to be left unchanged, according to a Reuters poll, but it suggested that policy easing may be in the offing.

On the pension reform front, Economy Minister Paulo Guedes said the bill could still be saved if lawmakers reverse some changes made to the draft last week. The changes and Guedes' criticism of it had hit markets on Friday.

But lower house Speaker Rodrigo Maia said the changes will help ensure it gets majority backing in the final lower house vote and that he expects the special congressional committee to approve the bill on June 26.

Stocks in Sao Paulo .BVSP traded flat, in line with world stocks .MIWD00000PUS, as did most other regional bourses. MKTS/GLOB

State-run oil company Petroleo Brasileiro PETR4.SA, PETR3.SA rose 0.6% despite a fall in oil prices. O/R

The firm said it made natural gas discoveries, which as per a report newspaper report, could help deliver the "cheap energy shock" to Brazil promised by Guedes.

Planemaker Embraer SA EMBR3.SA rose on signing a contract worth $1.9 billion with United Airlines UAL.O for the delivery of up to 39 E175 jets.

Mining major Vale VALE3.SA weighed the most. Iron ore prices fell after Vale said it expects to soon restore 20 million tonnes of yearly capacity at its Brucutu mine in Brazil.IRONORE/

Markets in Argentina were closed for a local holiday.

Key Latin American stock indexes and currencies at 1930 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1011.48

-0.35

MSCI LatAm .MILA00000PUS

2742.62

-0.41

Brazil Bovespa .BVSP

98021.42

-0.02

Mexico IPC .MXX

43150.81

0.05

Colombia IGBC .IGBC

12305.02

-0.09

Currencies

Latest

Daily % change

Brazil real BRBY

3.9019

-0.08

Mexico peso MXN=D2

19.1745

-0.13

Chile peso CLP=CL

700.2

-0.06

Colombia peso COP=

3281.03

-0.39

Peru sol PEN=PE

3.347

-0.03

(Reporting by Susan Mathew in Bengaluru; Editing by Richard Chang)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130; Reuters Messaging: susan.mathew.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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