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Brazil central bank seen keeping rates unchanged at 13.75%
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Dollar muted ahead of high-stakes Fed decision
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Colombia government to send pension proposal to Congress
By Shreyashi Sanyal March 22 (Reuters) - Brazil's real fell on Wednesday ahead of what will likely be the fifth consecutive pause in its central bank's policy rate, while other Latin American currencies rose against a flat dollar on bets that the Federal Reserve will deliver a smaller rate hike. The real fell 0.5% against the dollar. Later in the day Brazil's Monetary Policy Committee (Copom), which sets rates, is seen keeping the benchmark Selic rate at a six-year high of 13.75%.
"I think we're at the end of the hiking cycle, then again, the language of the central bank is going to be important," said James Barrineau, chief investment strategist at Main Street Financial Group in New York.
"I do think that they'll set the market up for eventual rate cuts and hopefully that will improve sentiment in Brazil." Brazil's Bovespa index fell 0.3%, weighed down by a 6% fall in Brazilian fuel distributor Vibra Energia SA as it posted a nearly 45% decline in fourth-quarter net profit.
The focus will also be on the U.S. central bank as the Fed is expected to raise its interest rates by 25 basis points, as opposed to a 50 bps increase expected earlier this month. After the global rout in the banking sector whipsawed financials markets in the past two weeks, a sense of calm seemed to have been gradually restored as it also lifted hopes that the Fed will likely tone down its hawkish approach.
The dollar was largely muted on the day, helping other emerging market currencies gain. Colombia's peso rose 1%, while Peru's sol and Chile's peso rose about 0.5% each.
The Colombian government will file a pension reform project in Congress to expand coverage and strengthen the state pension administrator, but it raises doubts about the impact it would have on the capital markets and public finances.
Mexico's peso rose 0.2%. The country's economy likely grew by 3.5% in February 2023, compared with the same month a year earlier, a preliminary estimate from national statistics agency INEGI showed. Argentina's slow-and-steady currency devaluation plan is coming under rising pressure as a historic drought pummels exports of cash crops soy and corn, draining the country's reserves of dollars needed to prop up the embattled peso.
Key Latin American stock indexes and currencies at 1503 GMT:
Stock indexes Latest Daily
%
change
MSCI Emerging Markets 962.96 1.1
MSCI LatAm 2098.25 -0.08
Brazil Bovespa 100875.7 -0.12
2
Mexico IPC 52709.10 0.11
Chile IPSA 5293.54 -0.11
Argentina MerVal 225416.8 -1.474
4
Colombia COLCAP 1129.66 0
Currencies Latest Daily
%
change
Brazil real 5.2688 -0.45
Mexico peso 18.5600 0.15
Chile peso 818.4 0.43
Colombia peso 4772.84 0.73
Peru sol 3.7689 -0.19
Argentina peso (interbank) 205.3800 -0.18
Argentina peso (parallel) 387 1.81
(Reporting by Shreyashi Sanyal & Shashwat Chauhan in Bengaluru;
Editing by Alison Williams)
