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Brazil c.bank holds rates at 13.75% on Wednesday
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Lula criticizes c.bank after Copom holds rates at 6-yr
high
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Argentina orders public sector to give up dollar bonds
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Mexico inflation rises less than expected in early March
(Updates prices, details; adds comment)
By Shreyashi Sanyal and Bansari Mayur Kamdar
March 23 (Reuters) -
Most major Latin American currencies rose against a muted dollar on Thursday after the Federal Reserve signaled it was on the verge of pausing future hikes, while Brazil's real failed to join the broader rally after its central bank kept rates unchanged.
The dollar was flat after the Fed raised its benchmark funds rate 25 basis points on Wednesday, but dropped language about "ongoing increases" being needed in favor of "some additional" rises. The flat dollar boosted riskier emerging market assets, which have been pressured by stresses in the global banking sector and high interest rates in the developed world. The Brazilian real lagged regional peers, shedding 0.7% after its central bank held the Selic benchmark interest rate at 13.75% on Wednesday, for the fifth straight meeting, weakening bets of imminent monetary easing. Finance Minister Fernando Haddad called the central bank's statement "very concerning." "Policymakers likely will keep interest rates on hold on the next meeting in May, but we still think that rate cuts will come in Q3, assuming a fiscally responsible fiscal framework and the stabilisation of long-term inflation expectations," said Andres Abadia, Chief LatAm economist at Pantheon Macroeconomics. "We can’t rule out a rate cut in June, if the global financial crisis worsens."
Investors were also left frustrated after Brazilian President Luiz Inacio Lula da Silva delayed announcing a proposal for new fiscal rules earlier in the week, disappointing expectations for a presentation that was initially expected by this week.
"The delay highlights key tensions within the government,
including between the left wing of Lula's Workers' Party (PT)
and the fiscally responsible faction of the government, which
includes Haddad, Vice-President Geraldo Alckmin and Planning
Minister Simone Tebet," said Elizabeth Johnson, head of TS
Lombard's Brazil research team.
"It also underscores the challenges that Lula faces as he tries to improve his approval rating at a time when the economy is slowing and global uncertainty is mounting." Elsewhere, Chile's peso rose 0.4%, tracking a rise in prices of its no.1 export, copper. The red metal found support against a weaker dollar, while steadying oil prices lifted the currencies of Colombia and Mexico , 0.3% and 0.1%, respectively.
Peru's sol added 0.5%, while stocks in the region shed 0.8%.
Argentina ordered public sector bodies to sell or exchange their holdings of eleven sovereign dollar bonds in a bid to reorganize its debt as inflation soared above 100% and its foreign reserves dropped.
Latin American stock indexes and currencies at 1508 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 976.51 1.56 MSCI LatAm 2050.82 -1.83 Brazil Bovespa 97513.61 -2.7 Mexico IPC 52685.88 0.26 Chile IPSA 5277.23 0.11 Argentina MerVal 219930.12 -2.216 Colombia COLCAP 1096.50 -2.21
Currencies Latest Daily % change Brazil real 5.2891 -1.01 Mexico peso 18.5950 0.06 Chile peso 806 0.42 Colombia peso 4751.4 0.33 Peru sol 3.7653 -0.20 Argentina peso (interbank) 205.7500 -0.18 Argentina peso (parallel) 385 1.56
(Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru; editing by Grant McCool and Diane Craft)
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