January 29, 2018 / 11:16 PM / 3 months ago

EMERGING MARKETS-LatAm currencies weaker on prospects of tighter policy abroad

 (Updates prices, adds Colombia rate cut)
    By Bruno Federowski
    SAO PAULO, Jan 29 (Reuters) - Latin American currencies
weakened on Monday as prospects of tighter monetary policy
throughout developed markets drove investors away from
high-yielding assets.
    Dutch central bank president Klaas Knot said on Sunday that
"there is no reason whatsoever" for the European Central Bank
(ECB) to continue its asset purchase program, suggesting years
of policy stimulus may be coming to an end sooner than expected.
    His remarks added to a growing perception that strong global
growth could force policymakers to tighten policy faster in
coming months, potentially draining funds away from emerging
markets.
    Some economists expect the Federal Reserve to raise its
economic assessment when it concludes its two-day meeting on
Wednesday, which would increase the probability that the U.S.
central bank raises interest rates four times this year.
    The U.S. government's key payrolls report, scheduled for
Friday, could also shed further light on the outlook for
monetary policy.
    Currencies from Chile, Colombia, Mexico
 and Brazil weakened between 0.26 percent and
0.81 percent, capping a January rally in which all of them
posted hefty gains.
    Stock markets were mixed, with Brazil's benchmark Bovespa
stock index down 1 percent as traders booked profit on
recent gains that drove it to all-time highs.
    Shares of wood pulp producer Fibria Celulose SA,
however, jumped more than 5 percent on a report that
Netherlands-based Paper Excellence was considering acquiring it.

    In Colombia, the central bank unexpectedly lowered the
lending rate on Monday, the last cut in its current cycle, as
policymakers try to boost a still-sluggish economy even as
inflation remains above target.
    The seven-member board voted four-to-three to reduce the
lending rate by 25 basis points to 4.50 percent, surprising the
majority of analysts in a Reuters poll last week, who expected a
hold.

    Key Latin American stock indexes and currencies at 2200 GMT:
    
 Stock indexes              Latest  daily % change  YTD % change
                                                    
 MSCI Emerging             1217.67            0.58          4.51
 Markets                                            
 MSCI LatAm                3007.28           -0.32          6.67
                                                    
 Brazil Bovespa           79831.76             0.1          4.49
                                                    
 Mexico IPC               49510.15            0.25          0.32
                                                    
 Chile IPSA                5745.95            0.22          3.26
                                                    
 Chile IGPA               28911.17            0.28          3.33
                                                    
 Argentina MerVal         33542.68           -0.24         11.56
                                                    
 Colombia IGBC            11727.78            1.47          3.14
                                                    
 Venezuela IBC             2324.29           17.01         84.01
                                                    
                                                                
 Currencies            Latest       daily % change  YTD % change
                                                    
                                                    
 Brazil real                3.1650           -0.81          4.69
                                                    
 Mexico peso               18.6255           -0.73         5.764
                                                    
 Chile peso                 603.20           -0.26          1.90
                                                    
 Colombia peso             2835.93           -0.81          5.15
                                                    
 Peru sol                   3.2150           -0.47          0.68
                                                    
 Argentina peso              19.58           -0.09         -5.01
 (interbank)                                        
                                                    
 Argentina peso              19.98           -0.25         -3.75
 (parallel)                                         
                                                    
 
    

 (Reporting by Bruno Federowski; Editing by Susan Thomas and
Matthew Lewis)
  
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