EMERGING MARKETS-Peru's sol leads Latam FX higher as dollar dips; Chile c.bank in focus

BY Reuters | TREASURY | 10/13/21 03:36 PM EDT
       * Chile c.bank expected to hike by at least 75 bps
    * Peru's sol rises almost 2%
    * Brazil's real reverses session losses
    * Chilean stocks down more than 2%

 (Updates to close)
    By Ambar Warrick and Susan Mathew
    Oct 13 (Reuters) - Most Latin American currencies rallied on
Wednesday as the dollar tracked U.S. Treasury yields lower, with
Peru's sol rising almost 2%, while Chile's peso was up nearly 1%
ahead of a widely anticipated interest rate hike by the central
bank.
    Peru's sol surged to 11-week highs, gaining for a
fifth straight session after a seemingly moderate shift in
President Pedro Castillo last week cheered
investors.
    After raising the rate to 1.5% in August, Chile's central
bank is broadly expected to hike rates by at least 75 basis
points to 2.25%. Some analysts have flagged the possibility of a
150 bps hike.
    The peso moved further away from 1-1/2-year lows with
investors watching for comments on how the central bank planned
to respond to a recent spike in inflation.
    "The adverse inflation result in September, the likely
deterioration of inflation expectations, and the still-strong
economic performance, will probably lead the bank to accelerate
the removal of monetary stimulus," Credit Suisse analysts wrote
in a note. They expect the bank to hike by 100 bps.
    On the political front, Chilean opposition lawmakers
launched impeachment proceedings against right-leaning President
Sebastian Pinera on Wednesday over revelations made in the
Pandora Papers. This comes ahead of presidential elections in
November.
    Most other Latam currencies rallied as falling U.S. Treasury
yields saw the dollar give up gains made after a solid rise in
U.S. inflation spurred bets of faster tightening by the Federal
Reserve. Minutes from central bank's last meeting showed they
could start tapering in
mid-November.
    A director at Brazil's central bank said the risk of
out-of-control inflation in the United States would create a
much more challenging outlook for emerging markets.
    Concerns over rising inflation have hurt emerging market
assets in recent months, with a spike in oil prices adding more
pressure on several import-reliant economies.
    Brazil's real reversed session losses to trade 0.5%
higher, and stocks in Sao Paulo rose 1.3%. Economy
Minister Paulo Guedes said the government remained committed to
pushing through tax and public administration reforms, and that
medium-term fiscal sustainability remains critical.
    Chile's main equity index hit 11-month lows,
falling as much as 3%, as retailer Cencosud sank
18% despite announcing a dividend.
    In Colombia, the peso fell from over three-month
peaks as oil prices slipped after steadying earlier in the day.


    Key Latin American stock indexes and currencies:
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets      1262.67     0.72

 MSCI LatAm                 2245.62     1.28

 Brazil Bovespa           113676.89     1.33

 Mexico IPC                51755.96    -0.15

 Chile IPSA                 4006.91    -2.34

 Argentina MerVal          78286.87    0.461

 Colombia COLCAP            1393.55     0.51


      Currencies           Latest    Daily %
                                     change
 Brazil real                 5.5077     0.52

 Mexico peso                20.5871     0.91

 Chile peso                   815.6     0.72

 Colombia peso               3741.4    -0.60

 Peru sol                    3.9653     1.53

 Argentina peso             99.1200    -0.02
 (interbank)


 (Reporting by Ambar Warrick; Editing by Andrea Ricci and
Marguerita Choy)

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