December 18, 2018 / 1:45 PM / 6 months ago

EMERGING MARKETS-Mexican peso, Brazilian real make marginal moves vs dollar

    By Susan Mathew
    Dec 18 (Reuters) - The Brazilian real and the Mexican peso
struggled to hold gains against a softer dollar on Tuesday, with
investors awaiting the outcome of the U.S. Federal Reserve's
two-day meeting on Wednesday. 
    While an interest rate hike was priced in, the dollar fell
as bets increased that the Fed might slow its pace of hikes in
the coming year in the light of weak economic data.

    Analysts said a "dovish hike" may provide some relief to
emerging market currencies by keeping the dollar pressured.
    Mexico's peso crept higher as a rally on the budget
presented by new President Andres Manuel Lopez Obrador subsided.

    "Fundamentally, the budget is a piece of paper. What really
matters is the implementation of that budget," said Edward
Glossop, a Latam economist with Capital Economics.
    "I think investors are starting to turn their attention to
other risks AMLO presents," referring to the acronym for the new
    The last two months have been particularly difficult for
Mexican markets as investors questioning the new government's
policy direction.
   The Brazilian real trimmed early gains and steadied,
while stocks in Sao Paulo rose a half percent. Airliner
Gol Linhas Aereas was the best performer, up 3.3
    Gains on the index were capped as energy stocks tracked
lower oil prices.
    "The next cue for Brazilian assets will be the inflation
report later this week, which will help give an indication on
whether the central bank's dovish tone at the last meeting is
something that's a bit more persistent," Glossop said.

    Earlier this month, the central bank held interest rates at
an all-time low and hinted it will hold off hikes for longer
than expected as inflation slowed. 

    Key Latin American stock indexes and currencies at 1319 PM:
    Stock indexes             Latest    Daily %    YTD %
                                         change    change
 MSCI Emerging Markets          964.27     -0.37    -16.46
 MSCI LatAm                    2523.45      0.52    -11.23
 Brazil Bovespa               86798.56      0.46     13.61
 Mexico IPC                          -         -         -
 Chile IPSA                    5104.97         0      0.00
 Argentina MerVal                    -         -         -
 Colombia IGBC                       -         -         -
       Currencies             Latest    Daily %    YTD %
                                         change    change
 Brazil real                    3.8969     -0.11    -14.98
 Mexico peso                   20.0642      0.03     -1.82
 Chile peso                      686.1      0.25    -10.41
 Colombia peso                       -         -         -
 Peru sol                            -         -         -
 Argentina peso                      -         -         -

 (Reporting by Susan Mathew in Bengaluru; Editing by Jeffrey
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