EMERGING MARKETS-Latam assets weaken amid doubts on further U.S. rate cuts

Sruthi Shankar

(Recasts following Federal Reserve decision; updates prices) Sept 18 (Reuters) - Latin American currencies and stocks lost steam on Wednesday after the U.S. Federal Reserve lowered interest rates as expected, but doubts about further rate cuts prompted investors to cut exposure to risky assets. With the U.S. dollar broadly strengthening after the release of the Fed's policy statement, the Brazilian real led losses among the regional currencies with a 0.7% decline ahead of a rate decision from Brazil's central bank. The Fed cut rates by 25 basis points, its second this year, citing global risks and "weakened" business investment and exports. New projections also showed policymakers at the median expected rates to stay within the new range through 2020, driving investors to cut bets on further U.S. rate cuts. The projections are shown as dots on a graphic. "These dots emphasize the characterization of the recent cuts as a "mid-cycle adjustment," Thomas Simons, senior money market economist at Jefferies, wrote in a note. "Even the most dovish policymakers have dots that are no lower than 1 rate cut away from the current level." Emerging market assets have benefited this year as major central banks moved to ease monetary policy in the wake of a bruising trade war between the United States and China that has put the world economy at the risk of a recession. Brazil's central bank, Copom, is expected to cut its benchmark interest rate to a new low on Wednesday, according to a Reuters poll of economists, as it tries to boost a lackluster economic recovery and prevent inflation from falling too far below target. Since Copom cut rates at the end of July, central bank president Roberto Campos Neto has said several times that low inflation and a "benign" outlook provide room for further policy "adjustment." Stock markets took a beating. Brazil's Bovespa, Mexico's IPC and Colombian shares were down between 0.3% and 1%, while MSCI's index of Latin American stocks fell 0.6%. Mexico's peso edged lower, while the Colombian peso outperformed its regional peers even as oil prices extended losses for a second day after Saudi Arabia said it would quickly restore full production following last weekend's attacks on its facilities and as U.S. crude stockpiles rose unexpectedly. Markets in Chile were shut for a public holiday.

Latin American stock indexes and currencies at 1922:

Stock indexes Latest Daily %


MSCI Emerging Markets 1020.30 0.13MSCI LatAm 2704.67 -0.6Brazil Bovespa 104252.09 -0.35Mexico IPC 42987.52 -1.06Chile IPSA 5072.93 0.06Argentina MerVal 29709.77 -1.462Colombia IGBC 12936.40 -0.53Currencies Latest Daily %


Brazil real 4.1056 -0.69Mexico peso 19.4150 -0.27Chile peso 713.55 0.00Colombia peso 3372.2 0.29Peru sol 3.35 -0.36Argentina peso (interbank) 56.5150 -0.03

(Reporting by Sruthi Shankar in Bengaluru Editing by Leslie Adler)