Latam FX rises against softer dollar, Vale weighs on Brazil's Bovespa

<html xmlns=""><head><title>EMERGING MARKETS-Latam FX rises against softer dollar, Vale weighs on Brazil's Bovespa</title></head><body>

Dollar dips ahead of Fed rate decision

Chile's economic activity falls less than expected in December

Peru consumer prices rise 0.23% in January, below forecasts

Moody's affirms Peru rating but unrest triggers negative outlook

Vale weighs on Bovespa after Q4 iron ore output edges down

Latam stocks down 0.6%, FX adds 0.4%

By Bansari Mayur Kamdar

Feb 1 (Reuters) -Currencies in Latin America on Wednesday rose against a weaker dollar in the lead-up to a much-awaited interest rate decision by the Federal Reserve, while Brazilian stocks fell sharply, led by weakness in Vale, one of the world's largest mining companies.

Chile's peso CLP= climbed 0.3% against the greenback after data showed its economy beat analyst forecasts in December.

The IMACEC economic activity index of the world's largest copper producer still ended 2022 in negative territory as it faced a slowdown after a rapid post-pandemic recovery.

The Colombian peso COP= snapped three days of losses and gained 0.3% to 4654 against the dollar, while oil producer Mexico's peso MXN= added 0.5%, supported by firm crude prices and a weak dollar.

All eyes were on the Fed's rate decision, with investors pricing a 25 basis points rise later in the day and betting on an end to the rate hikes soon.

"There is this view in the marketplace that, yes, the Fed is going to hike, but they're very near the end of that cycle, so they'll signal a more neutral stance," said Rachel Ziemba, founder of Ziemba Insights.

"The bigger point continues to be that some of the Latam central banks were more ahead of the curve and inflation is looking a bit more manageable, so it is not a surprise to me that the more liquid Latam currencies are strengthening a bit more."

Latin American stocks .MILA00000PUS fell 0.6%, underperforming the 1.2% jump in the broader emerging markets index .MSCIEF as Chinese stocks rallied after data showed factory activity in the world's second largest economy shrank more slowly in January than in the previous month.

In Brazil, the Bovespa index .BVSP fell 1.1%, as Vale VALE3.SA slid after reporting a 1% fall in iron ore production for the fourth-quarter from a year earlier.

Brazil's real BRL=, BRBY slipped against the dollar ahead of its rate decision. The central bank is expected to keep rates unchanged at 13.75%, according to a Reuters poll.

Data showed producer prices in Latin America's largest economy fell to 1.29% from the previous month, while another survey showed factory activity in Brazil shrank again in January.

"We're continuing to see the market be a bit skeptical about Brazilian macro policy," added Ziemba.

Peru's sol PEN= edged up against the dollar after data showed a smaller-than-expected rise in inflation.

Moody's Investors Service affirmed its investment grade rating for Peru on Tuesday, but cut its outlook on the sovereign to negative from stable, citing the possibility of further deterioration amid an ongoing political crisis.

Key Latin American stock indexes and currencies at 1505 GMT:

Stock indexes


Daily % change

MSCI Emerging Markets .MSCIEF






Brazil Bovespa .BVSP



Mexico IPC .MXX






Argentina MerVal .MERV








Daily % change

Brazil real BRBY



Mexico peso MXN=D2



Chile peso CLP=CL



Colombia peso COP=



Peru sol PEN=PE



Argentina peso (interbank) ARS=RASL



Argentina peso (parallel) ARSB=



Reporting by Bansari Mayur Kamdar in Bengaluru; editing by Jonathan Oatis


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