February 6, 2019 / 2:35 PM / 13 days ago

REFILE-EMERGING MARKETS-Latam FX weaken, Brazil stocks down more than 2 pct

 (Corrects day of the week in first paragraph)
    Feb 6 (Reuters) - Latin American currencies weakened against
a firmer U.S. dollar on Wednesday, weighed by Brazil's real as
it awaited a central bank decision on interest rates, while the
country's stock market tumbled amid a drop in shares of lenders.
    The real declined 1.1 percent and was on course for
its worst day in two weeks. Brazil's central bank is expected to
stand pat on interest rates at 6.50 percent and hold off on
hiking the benchmark borrowing rate for the rest of the year, a
Reuters poll showed.
    The decision is expected later in the day, with analysts
saying the focus may slowly be shifting to whether the bank's
next policy move could be a rate cut.
    "We think such speculation (rate cut) is way premature,"
analysts at Commerzbank said in a note, pointing to the fact
that a much-anticipated pension reform was yet to be passed.
    "The central bank had always stressed that fiscal policy
reforms were necessary to keep inflation in check. Against this
backdrop, the central bank should stay cautious and not fuel
rate cut speculation further."
    Over the year, however, a separate Reuters poll showed that
the Brazilian real will advance on hopes President Jair
Bolsonaro will deliver on his economic reform agenda, although
investors' optimism may already largely be priced in.

    The Bovepsa stock index slumped more than 2 percent,
with all sectors in the red. Top lenders were the biggest drags
on the finance-heavy index.
    Meanwhile, Mexico's peso fell after gains in the
previous session when President Andres Manuel Lopez Obrador said
his government would take extraordinary measures to support
debt-laden state oil company Pemex after it was recently
downgraded by Fitch rating agency.
    Mexico's central bank is to meet on Thursday to decide on
interest rates, with expectations that it would hold the key
rate at 8.25 percent.
    "We think that the board will leave the door open to further
hikes if the inflation scenario were to worsen," Credit Suisse
analysts said in a note. "It will likely acknowledge a clear
worsening in the growth outlook in early 2019 partly due to the
gasoline shortages in several areas of the country last year."
    "We are inclined to think that the bank will likely maintain
the same policy guidance as in previous statements."
    The Chilean peso broke a six-day wining streak and
was down 0.3 percent, while oil exporter Colombia's peso
slipped, in line with a decline in oil prices.
    
    Key Latin American stock indexes and currencies at 1415 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1050.11     -0.17
                                        
 MSCI LatAm                    2906.61     -1.76
                                        
 Brazil Bovespa               96371.66     -1.97
                                        
 Mexico IPC                          -         -
                                        
 Chile IPSA                    5447.97     -0.34
                                        
 Argentina MerVal                    -         -
                                        
 Colombia IGBC                       -         -
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.7079     -1.14
                                        
 Mexico peso                   19.1475     -0.62
                                        
 Chile peso                      653.2     -0.34
                                        
 Colombia peso                 3109.88     -0.09
 Peru sol                            -         -
                                        
 Argentina peso                      -         -
 (interbank)                            
                                        
 
    

 (Reporting by Susan Mathew in Bengaluru; Editing by Bernadette
Baum)
  
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