Strong dollar dents Latam FX after Powell comments



* S&P cuts China 2022 GDP forecast, says EM growth to slow

* Brazil's real recovers from more than four-month lows

* Other Latam currencies slip as dollar gains strength

* Russia looks to curb rouble rally

By Susan Mathew

June 29 (Reuters) - Most Latin American currencies gave up early gains on Wednesday as the dollar strengthened following some hawkish comments by U.S. Federal Reserve policymakers, while Russia's rouble pared gains as the finance ministry looked to curb the currency's surge.

Mexico's peso MXN= was flat, while some other regional currencies fell between 0.1% and 0.7%.

Brazil's real BRBY outperformed, up 0.7%, recovering from over four-month lows hit last session. Brazil plans to simplify procedures for issuing private bonds to stimulate fundraising through capital markets, an economy ministry official told Reuters.

Fed chair Jerome Powell on Wednesday stuck to the central bank's hawkish stance citing surging inflation as a bigger risk. This followed hawkish comments from Fed policymakers pushing for big and faster interest rate hikes, denting risk appetite and lifting the dollar.

"Emerging markets and commodities could stay under pressure if the (dollar) stays bouncy," said AJ Bell Investment Director Russ Mould.

"Many emerging nations borrow in dollars, and weakness in their currency relative to the American one makes it more expensive to pay the coupons and eventually repay the original loans."

Fears that aggressive central bank tightening will push economies into recession have gripped markets this year. MSCI's index of EM shares .MSCIEF is on course for its biggest quarterly drop since a coronavirus driven rout in the first quarter of 2020, and its worst first half since at least 2008.

EM currencies .MIEM0000CUS are on track for their weakest first half performance since 2020.

Looking ahead, emerging market economies will slow in the second half of this year amid high inflation, ratings agency S&P said, cutting GDP growth prediction for China to 3.3%, from 4.2% in May.

Russia's rouble RUB= RUBUTSTN=MCX pared some gains after it hit 50 to the dollar as Russia's finance minister flagged possible interventions to ease upward pressure on the currency. It may start buying the currencies of "friendly" countries and use those holdings to try to influence the exchange rate of the dollar and euro.

The rouble has soared to seven-year highs, boosted by capital controls that include curbs on Russians withdrawing foreign currency savings, thereby eating into Russia's export income by denting the value of dollar and euro proceeds from sales abroad of commodities and other goods.

South Africa's rand ZAR= extended losses to a two-week low as state power utility Eskom said it would resume "Stage 6" power cuts.

Tracking a choppy session on Wall Street, most Latam bourses were lower, with Colombia's main index .COLCAP down 1.0%. Brazil's Bovespa index .BVSP fell 0.4% with losses capped by a 0.9% rise in oil firm Petrobras PETR4.SA as crude prices firmed.

Key Latin American stock indexes and currencies at 1433 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

1013.65

-1.59 .MSCIEF

MSCI LatAm

2081.22

-0.72 .MILA00000PUS

Brazil Bovespa

100173.28

-0.42 .BVSP

Mexico IPC

48108.54

-0.67 .MXX

Chile IPSA

4997.38

-0.17 .SPIPSA

Argentina MerVal

88147.10 -0.054 .MERV

Colombia COLCAP

1367.48

-0.99 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.2306

0.68 BRBY

Mexico peso

20.1280

-0.03 MXN=D2

Chile peso

918.1

-0.82 CLP=CL

Colombia peso COP=

4117.6

-0.75 Argentina peso

125.0400

-0.13 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru. Editing by Jane Merriman

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