* Brazil central bank cuts rates for a third straight
meeting to 14.25%
* MSCI LatAm FX fall 1.7%, stocks off 1.5%
(Updates with afternoon trading levels)
By Ragini Mathur, Avinash P and Shashwat Chauhan
June 18 (Reuters) - Most Latin American currencies weakened
against a firmer dollar on Thursday, as investors weighed the
growing chances of a U.S. Federal Reserve interest rate hike
later this year, offsetting optimism over the reopening of the
Strait of Hormuz.
Brazil's real dropped 1.2%, also pressured by the
central bank'sthird straight rate cut to 14.25%, whileleaving
its next steps open despite acknowledging a tougher inflation
outlook and risks from election-year fiscal stimulus.
Traders now expect Wednesday's cut to be the Brazilian
central bank's last this year, according to LSEG data.
The decision came as economists pared back expectations for
rate cuts by major global central banks following an oil-price
shock tied to the Middle East conflict.
Inflation expectations for Brazil have climbed steadily,
including over longer horizons, as President Luiz Inacio Lula da
Silva expands household support measures ahead of his October
re-election bid.
The Mexican peso lost 0.4%, with MSCI's broader gauge
of Latin American currencies down 1.7%. The
dollar index, meanwhile, gained 0.5%.
On Wednesday, the Federal Reserve held its main lending rate
steady, with policymakers' projections showing a rate hike in
2026.
"We think that the bar for further dollar gains from here is
quite high. The imminent signing of the Iran framework peace
deal means that oil prices could continue to ease, which should
alleviate pressure on U.S. inflation and may preclude hikes in
the second half of the year," said Matthew Ryan, head of market
strategy at Ebury.
Traders now see more than 70% chance of a Fed rate hike as
soon as September, according to the CME FedWatch Tool.
Colombia's peso was an outlier, climbing 0.5% against
the dollar ahead of Sunday's presidential vote where right-wing
candidate Abelardo De La Espriella would be squaring up against
Senator Ivan Cepeda.
Among stocks, MSCI's index for the region
shed 1.5%, while local bourses were trading in a mixed band.
In Brazil, petrochemical firm Braskem dropped
9.5% amid news reports on its debt negotiations with creditors.
Meanwhile, U.S. President Donald Trump said on Wednesday
that the U.S. would be better off without the U.S.-Mexico-Canada
Agreement, and that he would prefer not to have a new pact,
though he remained open to one.
The six-year-old USMCA and its predecessor have underpinned
a deeply integrated North American economy. But as negotiations
are expected to advance in the coming months, Mexican assets
could face renewed volatility.
Key Latin American stock indexes and currencies:
Equities Latest Daily %
change
MSCI Emerging Markets 1784.76 0.12
MSCI LatAm 2962.53 -1.53
Brazil Bovespa 168210.97 -0.14
Mexico IPC 68237.56 -0.1
Chile IPSA 10837.87 0.3
Argentina Merval 3336288.71 1.3
Colombia COLCAP 2405.71 1.21
Currencies Latest Daily %
change
Brazil real 5.172 -1.19
Mexico peso 17.363 -0.41
Chile peso 900.22 -1.17
Colombia peso 3432.5 0.48
Peru sol 3.3812 -0.15
Argentina peso (interbank) 1450.5 -0.59
Argentina peso (parallel) 1465 0.68
(Reporting by Ragini Mathur, Avinash P and Shashwat Chauhan in
Bengaluru; Editing by Jan Harvey and Leroy Leo)
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