The U.S. dollar index fell 0.2%, lifting many emerging market currencies as risk sentiment rose on hopes the Fed will hike its benchmark lending rate by a smaller 25 basis points at the end of a two-day policy meeting on Wednesday.
The Fed's peak rate is now seen at about 4.8%, in a stark contrast to 5.5% only a few weeks ago.
"There are many indicators and market participants who say the Fed may still raise rates by 25 basis points. But it's hard to see the Fed raising rates much higher with all the emergency programs," said Anthony Denier, chief executive officer of online broker Webull. Currencies of the world's two biggest copper miners, Chile and Peru , led gains among central and south American economies, rising 0.4% and 0.9%, respectively after prices of the red metal jumped. Santiago stocks rose over 1%, while Peruvian equities gained about 0.3%.
Colombia's peso firmed 0.3%, while the Mexican peso added 0.7% as both oil producers benefited from a rise in crude prices.
"From a global markets perspective, developments around the stability of U.S. regional banks may continue to result in sharp intraday action in Latam," said Juan Manuel Herrera, senior strategist at Scotiabank.
Most emerging market assets have been hammered by fears of contagion sparked by distressed Swiss lender Credit Suisse and the collapse of two big regional banks in the Unites States. The MSCI's index for Latam stocks is down nearly 4% in March, heading for its second straight monthly decline.
Brazil's real was muted, and failed to join
the broader rally as investors were left frustrated after
President Luiz Inacio Lula da Silva said the proposal for a new
fiscal framework will only be announced after his visit to
China.
It was initially expected to be unveiled this week. Lula will be in China from March 26 to 30.
Brazil's central bank was also on tap for the week, with expectations that it will leave the Selic rate unchanged at 13.75% for the fifth straight meeting.
Brazilian retailer Americanas SA was up 4% after it presented to a court its post-bankruptcy reorganization plan, the broader Bovespa index rose 0.3%.
Separately, Ecuador declared a state of emergency in 14 provinces worst affected by severe weather and a strong earthquake that shook the country over the weekend.
Key Latin American stock indexes and currencies at 1535 GMT:
Stock indexes Latest Daily
%
change
MSCI Emerging Markets 953.25 1.09
MSCI LatAm 2100.52 1.15
Brazil Bovespa 101401.1 0.47
9
Mexico IPC 52332.30 0.78
Chile IPSA 5261.94 1.78
Argentina MerVal 225914.1 2.196
2
Colombia COLCAP 1135.18 2.23
Currencies Latest Daily
%
change
Brazil real 5.2390 0.06
Mexico peso 18.6951 0.63
Chile peso 821 0.50
Colombia peso 4805.5 0.18
Peru sol 3.7602 0.11
Argentina peso (interbank) 204.9100 -0.19
Argentina peso (parallel) 390 -1.03
(Reporting by Shreyashi Sanyal in Bengaluru)
