Latam currencies, stocks slump as investors reassess Fed prospects

Updated at 3:45 p.m. EDT/1945 GMT

By Bansari Mayur Kamdar

April 12 (Reuters) –Currencies and stock indexes in Latin America broadly fell on Friday, pressured by a rising dollar as investors continued to reprice expectations for U.S. monetary policy.

The MSCI index for Latin American currencies .MILA00000CUS fell 0.8% and was set to end the week 1% lower. A basket of regional stocks .MILA00000PUS fell 1.7% on the day and lost 2.2% for the week.

Both indexes were set for their worst week since mid-January as the U.S. dollar has soared this week, denting investor appetite for riskier emerging market assets.

The dollar index =USD jumped 1.7% this week after stronger than expected U.S. consumer prices data on Wednesday and commentary from Fed officials saying there is no rush to cut interest rates.

“This is partly just a reflection of the fact that Latin American central banks have had a bit more space to ease and some of this modest weakness we’ve seen this week is a bit of a reversal of the incredible strength,” said Rachel Ziemba, founder at Ziemba Insights.

Leading regional losses, Mexico’s peso MXN= dropped 1.3% against the dollar, the Colombian peso COP= fell 0.9% and Chile’s peso CLP=CL was down 1.2%.

“We’re entering into this important period for the (Mexican) peso with the election campaign and with the dynamics with the central bank,” Ziemba said.

Peru’s sol PEN= slipped 0.4% after its central bank cut the benchmark interest rate to 6.00% on Thursday, marking a return to monetary easing in Peru.

Data showed inflation in Argentina slowed to 11% on a monthly basis in March, below forecast, a day after the central bank cut its benchmark interest rate by 10 points to 70%.

The South American nation is battling inflation that is amongthe worst in the world, with rolling 12-month inflation at 287.9% in March. Argentina’s peso was trading at 985 to the dollar on the informal parallel market. ARSB=

Brazil’s real BRL= shed 0.6% against the greenback. Data showed activity in Brazil’s services sector fell 0.9% in February from the previous month, missinganalyst forecasts.

El Salvador priced a six-year, $1 billion note yielding 12% to be issued next week, underwritten by Bank of America Securities, LSEG data showed.

The broader emerging market currencies index .MIEM00000CUS fell 0.4% to its lowest level since January, while stocks .MSCIEF shed 1.3%.

HIGHLIGHTS:

** Argentina’s government (and a bot) say inflation is easing. Shoppers aren’t so sure

** El Salvador more likely to get new IMF deal than multiple rating upgrades – Moody’s

** Peru’s central bank: new pension withdrawal unlikely to fan inflation

Key Latin American stock indexes and currencies at 1945 GMT:

Reporting by Bansari Mayur Kamdar and Lisa Mattakcla in Bengaluru, Editing by Josie Kao