EMERGING MARKETS-Latam FX rises against softer dollar, Vale weighs on Brazil’s Bovespa

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* Dollar dips ahead of Fed rate decision * Chile’s economic activity falls less than expected in December * Peru consumer prices rise 0.23% in January, below forecasts * Moody’s affirms Peru rating but unrest triggers negative outlook * Vale weighs on Bovespa after Q4 iron ore output edges down * Latam stocks down 0.6%, FX adds 0.4% By Bansari Mayur Kamdar Feb 1 (Reuters) – Currencies in Latin America on Wednesday rose against a weaker dollar in the lead-up to a much-awaited interest rate decision by the Federal Reserve, while Brazilian stocks fell sharply, led by weakness in Vale, one of the world’s largest mining companies. Chile’s peso climbed 0.3% against the greenback after data showed its economy beat analyst forecasts in December. The IMACEC economic activity index of the world’s largest copper producer still ended 2022 in negative territory as it faced a slowdown after a rapid post-pandemic recovery. The Colombian peso snapped three days of losses and gained 0.3% to 4654 against the dollar, while oil producer Mexico’s peso added 0.5%, supported by firm crude prices and a weak dollar. All eyes were on the Fed’s rate decision, with investors pricing a 25 basis points rise later in the day and betting on an end to the rate hikes soon. “There is this view in the marketplace that, yes, the Fed is going to hike, but they’re very near the end of that cycle, so they’ll signal a more neutral stance,” said Rachel Ziemba, founder of Ziemba Insights. “The bigger point continues to be that some of the Latam central banks were more ahead of the curve and inflation is looking a bit more manageable, so it is not a surprise to me that the more liquid Latam currencies are strengthening a bit more.” Latin American stocks fell 0.6%, underperforming the 1.2% jump in the broader emerging markets index as Chinese stocks rallied after data showed factory activity in the world’s second largest economy shrank more slowly in January than in the previous month. In Brazil, the Bovespa index fell 1.1%, as Vale slid after reporting a 1% fall in iron ore production for the fourth-quarter from a year earlier. Brazil’s real slipped against the dollar ahead of its rate decision. The central bank is expected to keep rates unchanged at 13.75%, according to a Reuters poll. Data showed producer prices in Latin America’s largest economy fell to 1.29% from the previous month, while another survey showed factory activity in Brazil shrank again in January. “We’re continuing to see the market be a bit skeptical about Brazilian macro policy,” added Ziemba. Peru’s sol edged up against the dollar after data showed a smaller-than-expected rise in inflation. Moody’s Investors Service affirmed its investment grade rating for Peru on Tuesday, but cut its outlook on the sovereign to negative from stable, citing the possibility of further deterioration amid an ongoing political crisis. Key Latin American stock indexes and currencies at 1505 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1043.51 1.16 MSCI LatAm 2321.72 -0.55 Brazil Bovespa 112309.72 -0.99 Mexico IPC 54827.08 0.48 Chile IPSA 5322.43 0 Argentina MerVal 255375.78 0.721 Colombia COLCAP 1283.62 -0.5 Currencies Latest Daily % change Brazil real 5.0836 -0.17 Mexico peso 18.7537 0.35 Chile peso 793.9 0.16 Colombia peso 4651.65 0.35 Peru sol 3.8393 -0.23 Argentina peso (interbank) 187.2900 -0.15 Argentina peso (parallel) 377 1.06 (Reporting by Bansari Mayur Kamdar in Bengaluru; editing by Jonathan Oatis)

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