Wires

EMERGING MARKETS-Brazil FX up on less dovish cen bank, Colombia rate decision awaited

Susan Mathew

awaited@ Oct 31 (Reuters) - Brazil's real currency scaled 11-week peaks on Thursday as the country's central bank sounded less dovish about future rate cuts, while most other Latin American currencies inched higher against a dollar in the doldrums. The dollar fell 0.4% against a basket of six major rivals after the U.S. Federal Reserve cut interest rates as expected and signaled additional trims are unlikely, but the lack of an explicit signal that the bank is done with easing for now was perceived to be less hawkish than expected. "By suggesting that markets should not reprice the path of monetary policy much even if inflation were to start moving higher would suggest a more prolonged period of lower real rates, which ought to be bearish for USD," Morgan Stanley analysts said in a note. Colombia's peso rose for a fourth session in five, while Brazil's real rose as much as 0.7%. Brazil's central bank cut the benchmark interest rate to a new all-time low of 5.00% as expected on Wednesday, but signaled that further easing may be less aggressive than it has been in recent months, despite inflation running well below target.

Mexico's peso slipped 0.2% a day after data showed the economy crawled forward in the third quarter from the previous three-month period, falling short of forecasts and prolonging its tepid start under President Andres Manuel Lopez Obrador. "The market took this data as indicating that the likelihood of a 50 basis point cut in the upcoming Banxico meeting must be increasing, as front end rates kept falling," analysts at Citigroup said. "But with the Fed also signaling a pause, we doubt that Banxico is currently in the mindset of a 50bp cut, even though there is a clear willingness to cut more than the Fed," they said. Later in the day, Colombia's central bank is expected to stand pat on rates at its meeting. Any potential comments on a recent court decision to scrap the 2018 tax reform and a timeline for the administration to replace it, will be watched for. Among stocks, Sao Paulo listed shares fell 1%, in line with a move lower in U.S. stocks, on fresh trade uncertainty after a report said Chinese officials have doubts on the possibility of reaching a comprehensive long-term trade deal with Washington. Brazil's second largest private-sector lender Banco Bradesco was the biggest weight on the main index. The firm met estimates on quarterly net income, but reported a rise in loan arrears and loan loss provisions. Airline Gol slipped after reporting a quarterly loss hit by problems affecting its Boeing 737 planes.

Key Latin American stock indexes and currencies at 1333 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1042.90 0.13MSCI LatAm 2793.08 -0.29Brazil Bovespa 107310.23 -1.01Mexico IPC - -Chile IPSA - -Argentina MerVal - -Colombia IGBC - -Currencies Latest Daily %

change

Brazil real 3.9913 0.02Mexico peso 19.1211 -0.21Chile peso - -Colombia peso 3374.08 0.39Peru sol - -Argentina peso 59.4500 0.44

(interbank)

(Reporting by Susan Mathew in Bengaluru; Editing by Chizu Nomiyama)