SAO PAULO, July 26 (Reuters) - Most Latin American currencies edged higher on Wednesday as investors stuck to bets the Federal Reserve will stand pat on interest rates later in the day. Money markets suggest traders are all but certain the Fed will refrain from hiking rates following a batch of weaker-than-expected U.S. economic data. But its policy statement could provide valuable information for those seeking to determine when the U.S. central bank will likely raise rates again and begin unraveling its bond holdings. The Fed's path toward normalizing monetary policy following a series of unconventional easing measures in the aftermath of the 2007-2009 financial crisis is likely to steer capital away from high-yielding emerging markets and has been a key driver of currency moves this year. Currencies from Brazil, Mexico, Chile and Colombia firmed between 0.1 and 0.4 percent as traders avoided making risky moves ahead of the Fed decision. Trading in Brazil's currency and interest-rate futures markets was limited, ahead of an interest rate decision by the country's central bank due to be announced after the market close. The bank is widely expected to cut the benchmark Selic rate by an aggressive 100 basis points to 9.25 percent. Brazil's benchmark Bovespa stock index slipped 0.7 percent as traders feared the government could cut its fiscal target this year as a slower-than-expected economic recovery curbed fiscal revenues. Those concerns gained further impetus after a judge suspended a large fuel tax increase announced last week, taking away one option for covering the country's budget gap.
"Fiscal difficulties, political risks and the new threat of a downgrade if the government misses its fiscal target are reason enough to take a defensive stance," Lerosa Investimentos analyst Vitor Suzaki said.
Key Latin American stock indexes and currencies at 1645 GMT:
Stock indexes daily % YTD %
change change Latest
MSCI Emerging Markets 1063.05 0.13 23.13 MSCI LatAm 2731.69 -0.37 17.14 Brazil Bovespa 65193.02 -0.72 8.24 Mexico S&P/BVM IPC 51621.79 -0.18 13.10 Chile IPSA 5027.50 -0.12 21.10 Chile IGPA 25118.62 -0.09 21.15 Argentina MerVal 21211.84 -0.15 25.38 Colombia IGBC 10914.76 -0.24 7.77 Venezuela IBC 134583.50 0 324.48 Currencies daily % YTD %
change change Latest
Brazil real 3.1605 0.20 2.81 Mexico peso 17.7525 0.07 16.85 Chile peso 648.2 0.22 3.47 Colombia peso 3017.49 0.42 -0.53 Peru sol 3.248 0.06 5.11 Argentina peso (interbank) 17.4925 0.04 -9.25 Argentina peso (parallel) 18.15 -0.06 -7.33
(Reporting by Bruno Federowski; Editing by Tom Brown)