SAO PAULO, Jan 10 (Reuters) - Yields on short-term Brazilian interest rate futures inched up on Wednesday as higher-than-expected inflation data for 2017 drove traders to trim bets on two additional interest rate cuts. The benchmark IPCA index for last year rose more than the highest forecast in a Reuters poll of economists, though it still missed the official target range for the first time ever.
Short-term yields rose in the wake of the report as traders dialed back bets that the central bank would pursue two further cuts of 25 basis points in the Selic rate. Rate futures now price only one such cut in February, which would take rates to 6.75 percent. Brazil's central bank has cut rates by a total of 725 basis points since late 2016. Price pressures have been muted for months in Brazil, curbed growth. That may allow the central bank to keep rates at all-time lows for a long time, bolstering the economy's recovery. Nevertheless, the benchmark Bovespa stock index fell 0.5 percent, extending losses for a second day as traders booked profits from a rally early in the year that took it to all-time highs. Shares in logistics firm Rumo SA dropped 1.1 percent after UBS analysts downgraded their recommendation on the stock to "neutral" and cut the price target to 14.40 reais from 14.60 reais. Most Latin American currencies were flat as traders awaited U.S. inflation figures scheduled to be published later this week. That data will provide a further clue to the pace of U.S. interest rate hikes in the coming months. Demand for emerging markets assets took a hit on Wednesday on a report that China was ready to slow or halt its purchases of U.S. Treasuries, which could push up interest rates in developed economies. Officials reviewing China's foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, Bloomberg News reported, citing people familiar with the matter.
Key Latin American stock indexes and currencies at 1720 GMT:
Stock indexes daily % YTD %
change change Latest
MSCI Emerging Markets 1198.27 -0.57 4.03 MSCI LatAm 2942.97 -0.35 4.43 Brazil Bovespa 78548.15 -0.4 2.81 Mexico IPC 49183.67 -1.04 -0.35 Chile IPSA 5682.66 -0.48 2.12 Chile IGPA 28589.84 -0.45 2.18 Argentina MerVal 31695.54 -1.38 5.42 Colombia IGBC 11907.72 0.21 4.72 Currencies daily % YTD %
change change Latest
Brazil real 3.2389 0.21 2.30 Mexico peso 19.2300 0.03 2.44 Chile peso 609.26 -0.21 0.88 Colombia peso 2889.6 0.63 3.20 Peru sol 3.218 0.00 0.59 Argentina peso (interbank) 18.7300 1.25 -0.69 Argentina peso (parallel) 19.33 1.09 -0.52
(Reporting by Bruno Federowski; Editing by Paul Simao)