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Latam currencies firm as focus turns to Fed

By Sruthi Shankar Aug 21 (Reuters) – Latin American currencies rose on Wednesday, with the dollar on the defensive as investors looked forward to hints from the U.S. Federal Reserve chief about possible interest rate cuts. The Brazilian real rose 0.6%, leading gains among regional peers, after the central bank sold $200 million in the spot currency market for the first time in a decade. In a previously announced move, the central bank said it would sell dollars – along with existing sales of reverse currency swaps – to meet rising demand due to global market volatility. The real hit session low after central bank chief Roberto Campos Neto said the balance of economic risks and increasingly benign inflation means there is scope to cut interest rates further. Sao Paulo-listed shares rose 0.5%, helped by banking and energy stocks. Shares in state-owned oil firm Petrobras gained nearly 2% as crude prices jumped after industry data showed a larger than expected drop in U.S. crude inventories. Mexico’s peso gained 0.4% even as data showed Mexican retail sales fell 0.5% in June, compared with the previous month. The broad rise in emerging market assets came ahead of the release of minutes from the Fed’s July meeting, when policymakers cut interest rate for the first time in a decade. Of more interest will be Fed chief Jerome Powell’s speech at the Jackson Hole symposium later this week, as investors look for clues on further rate cuts, particularly after the U.S. bond market moves last week suggested a recession in the world’s largest economy is on the horizon. “Markets may be too optimistic in pricing more than 25bp for the September meeting and the upcoming Jackson Hole conference could end up being a disappointment for markets that expect central bank action to support risk sentiment once again,” Morgan Stanley analysts wrote in a note. Argentina’s peso edged 0.5% lower following a late recovery on Tuesday after the central bank poured $112 million of its reserves into dollar auctions. A jump in oil prices helped Colombian peso, while the Chilean peso held steady. Latin American stock indexes and currencies at 1918 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 983.09 0.3 MSCI LatAm 2592.63 0.38 Brazil Bovespa 99689.09 0.47 Mexico IPC – – Chile IPSA 4790.27 0.28 Argentina MerVal – – Colombia IGBC 12608.34 0.3 Currencies Latest Daily % change Brazil real 4.0316 0.45 Mexico peso 19.7115 0.25 Chile peso 708.8 0.01 Colombia peso 3395.86 0.28 Peru sol 3.3748 0.21 Argentina peso 54.9605 -0.55 (Reporting by Sruthi Shankar in Bengaluru Editing by Marguerita Choy)

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