* Brazil's central bank expected to deliver 25 bps cut
* Chilean peso set for longest winning streak since January
* World Bank approves guarantee-backed financing for
Argentina
* MSCI LatAm stocks down 0.9%, FX off 0.6%
(Updates with late afternoon trading)
By Ragini Mathur, Avinash P and Purvi Agarwal
June 17 (Reuters) - Most Latin American currencies and
stocks declined on Wednesday as investors assessed policy cues
from the U.S. Federal Reserve, signaling an interest rate hike
this year, alongside details of an interim truce between the
U.S. and Iran.
The U.S. central bank held interest rates steady but
policymakers expect a hike in borrowing costs later this year,
with markets adjusting to the change in communication under new
Chair Kevin Warsh.
"Warsh may have reshaped the optics - dropping the dot and
cutting the statement - but the substance of this FOMC is
hawkish," said Seema Shah, chief global Strategist, Principal
Asset Management.
"With half the 18 dots signaling a hike this year, alongside
higher inflation forecasts, the Fed may be just a few strong
inflation and jobs releases away from tightening."
The dollar index jumped to an over two-month high
following the decision, pressuring LatAm currencies. The MSCI
index tracking these currencies dipped 0.6%,
while the stocks counterpart lost 0.9%.
Meanwhile, U.S. President Donald Trump defended his
agreement with Iran, saying it had averted a global economic
catastrophe, while warning he could launch fresh attacks if
Tehran failed to honor its commitments.
The comments added to uncertainty for investors and sent oil
prices a touch higher on the day.
Mexico's peso was the biggest loser, down 1.2% and on
track for its biggest one-day drop in over a week.
Brazil's real depreciated 0.6% ahead of the central
bank's monetary policy decision, where it is expected to deliver
a third straight 25-basis-point cut as policymakers contend with
persistent inflation pressures while gradually lowering
borrowing costs from near two-decade highs.
The government said it would end subsidies for diesel and
gasoline if crude oil prices stabilized around $80 per barrel.
Local stocks slipped 0.8%, with miner Vale's
2.4% drag among the biggest.
Chile's peso was down 0.6%, set to snap a six-session
streak of gains - its longest since late January. Equities
declined 0.8% a day after the central bank held its
benchmark interest rate at 4.5% for a fourth consecutive
meeting, as inflation slowed slightly within the bank's target
range.
However, the central bank lowered its 2026 economic growth
forecast on Wednesday to between 1.0% and 1.75% from between
1.5% and 2.5% projected in March.
Argentina's stocks climbed 0.8%, an outlier. On
Tuesday, the World Bank Group said it had approved a
guarantee-backed financing package to help mobilize up to $2
billion in commercial loans for Argentina, aiming to lower
financing costs and strengthen public debt management.
Separately, an Inter-American Development Bank report showed
China was the fastest-growing buyer of Latin American and
Caribbean goods in the first quarter of 2026, though the U.S.
remained the region's top market.
Latin American countries have been seeking to diversify
export destinations as Trump has challenged established trade
ties with the region and threatened higher tariffs.
Key Latin American stock indexes and currencies:
Latin American market
prices from Reuters
Equities Latest Daily %
change
MSCI Emerging Markets 1774.75 -0.03
MSCI LatAm 2977.79 -0.90
Brazil Bovespa 168374.38 -0.75
Mexico IPC 68654.93 0.03
Chile IPSA 10813.72 -0.82
Argentina Merval 3313651 1.81
Colombia COLCAP 2376.37 0.07
Currencies Latest Daily %
change
Brazil real 5.1172 -0.55
Mexico peso 17.383 -1.16
Chile peso 890.9 -0.57
Colombia peso 3456.5 -0.97
Peru sol 3.3767 0.82
Argentina peso (interbank) 1441 -0.35
Argentina peso (parallel) 1455 -0.34
(Reporting by Ragini Mathur, Avinash P and Purvi Agarwal in
Bengaluru; Editing by Aurora Ellis and Anil D'Silva)
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