October 30, 2019 / 8:18 PM / 2 months ago

EMERGING MARKETS-Latam FX mixed after Fed rate decision, Chile's peso hits new low

 (Updates market prices)
    By Sruthi Shankar
    Oct 30 (Reuters) - Latin American currencies were mixed on
Wednesday as the dollar teetered after the U.S. Federal Reserve
cut interest rates as expected, but signalled a pause in further
rate cuts.
    Chile's peso led declines among the regional
currencies, weakening 1.6% to a record low after poor mining
data, while currencies of Brazil and Mexico gained
0.4% and 0.02%, respectively.
    The dollar index hit a session high initially after the U.S.
central bank cut policy rate by a quarter of a percentage point
as expected, but dropped reference that it "will act as
appropriate" to sustain the economic expansion in its policy
statement - language that was considered a sign for future rate
cuts.
    The greenback, however, lost steam after the Fed chief
Jerome Powell said the U.S. central bank is not thinking of
raising rates right now.
    "A bit of a change there that suggests that it's going to
take a little bit more weakness from here on out for the Fed to
lower rates," said Bipan Rai, North American head of FX strategy
at CIBC Capital Markets. 
    "And really it's going to take quite a sustained turn for
the worse in terms of trade discussions, and that should to a
degree cap dollar bearishness in the near term."
    The developing world has witnessed capital inflows this year
on expectations that major central banks will offset any
slowdown in global growth in the wake of trade disputes. The
Fed's move followed data earlier showing the U.S. economy slowed
less than expected in the third quarter.
    Brazil's central bank is expected to slash the key rate by
50 basis points, also for the third time this year. The real,
however reversed early losses ahead of the decision due after
2100 GMT.
    Chile's peso slid and stocks tumbled 2.8% to a eight-week
trough. The country's manufacturing production dropped in
September from a year ago amid a decrease in mining production,
government data showed.
    Analysts worry about deteriorating economic activity in
Chile - the world's biggest producer of copper as a recent
political crisis has seen union workers at BHP's Escondida
copper miner go on strike.
    President Sebastian Pinera said Chile will suspend hosting
the Asia Pacific summit next month. The United States and China
were expected to sign a partial trade agreement at the summit,
but Reuters reported U.S. officials warning the deal may not be
ready by then.
    This had hit sentiment globally earlier.
    Brazil's Bovepsa stock index gave up early losses to
gain 0.7% with retailer Magazine Luiza SA's zooming
7% after upbeat earnings report and fourth-quarter earnings
forecast.
    Card processor Cielo SA was down 3.8% after poor
quarterly results while the Brazilian unit of lender Santander
 fell despite beating estimates on results as its
Spanish parent posted a 75% decline in third-quarter
profit.
    Among other earnings, Colombia's state-run oil company
Ecopetrol said its investment spending this year could
reach between $4.4 billion and $5 billion and reported a rise in
third-quarter net profit. Its stock was down 0.5%.
            
    Key Latin American stock indexes and currencies at 1931 GMT:
    
       Stock indexes                Latest     Daily % change
 MSCI Emerging Markets                1042.41           -0.13
                                               
 MSCI LatAm                           2811.79            0.03
 Brazil Bovespa                     108274.75            0.67
 Mexico IPC                          43707.20           -0.33
 Chile IPSA                           4744.13            -2.8
                                               
 Argentina MerVal                    33463.24           2.824
 Colombia IGBC                       13211.65           -0.51
                                                             
          Currencies                Latest     Daily % change
 Brazil real                           3.9870            0.39
                                               
 Mexico peso                          19.1256            0.02
 Chile peso                             739.2           -1.62
 Colombia peso                         3387.4           -0.43
 Peru sol                               3.344           -0.24
                                               
 Argentina peso (interbank)           59.7000           -0.40
                                               
 
 (Reporting by Sruthi Shankar and Susan Mathew in Bengaluru;
additional reporting by Karen Brettell in New York; Editing by
David Gregorio and Diane Craft)
  
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