Thursday, January 20

EMERGING MARKETS-Brazils real jumps as strong inflation boosts rate hike bets –

    * Brazil 2021 inflation at six-year high
    * Chilean central bank seen raising rates this month
    * EM FX nonplussed by Powell testimony 

 (Updates with Powell testimony)
    By Susan Mathew and Ambar Warrick
    Jan 11 (Reuters) - Brazil's real rose the most among Latin
American currencies on Tuesday after a bigger-than-expected
spike in annual inflation strengthened expectations for another
strong interest rate hike by the central bank. 
    The real added 1.5% after data showed annual
inflation ended 2021 at a six-year high of 10.06%. That exceeded
expectations and was well above the central bank's target range
of 3.75% and the 5.25% limit of its tolerance range.

    "While inflation has now passed its peak and is likely to
fall further, (Brazil's central bank) will continue to tighten
monetary policy aggressively at its next meeting," said William
Jackson, chief EM economist at Capital Economics. 
    "We expect another 150 basis points hike, to 10.75%, in
early February. After that, the pace of tightening will probably
slow to a 75bp hike in March, at which point we expect the cycle
to draw to a close."
    The Brazilian central bank's monetary policy committee,
Copom, has been the most aggressive among global central banks
in tackling inflation. 
    Broader Latin American currencies advanced, with units in
Colombia and Chile taking support from stronger
oil and copper prices.
    Peru's sol rose 0.5% to a near six-month high, also
taking support from firmer copper prices. But the country
reported its highest-ever weekly COVID-19 case count.

    Chile's peso rose 0.8% as a Reuters poll showed Chile's
central bank is likely to hike lending rates by 100 basis points
to 5% this month -- a move that will be positive for the peso.

    Mexico's peso slipped 0.1% from near two-month highs
after three straight days of gains. 
    Mexican industrial production fell month-on-month in
November, data showed, which raises the chances that the economy
slipped into a recession last quarter, said Capital Economics'
EM economist Nikhil Sanghani. 
    Mexican President Andres Manuel Lopez Obrador on Tuesday
said he was doing well after announcing that he had contracted
COVID-19 for a second time.
    Latin American stocks firmed. Brazilian miners Usiminas
 and Vale took Sao Paulo's Bovespa index
 1.4% higher as iron ore and steel futures jumped on
supply concerns.
    Brazilian supply may see more trouble yet with heavy
rainfall in the southeastern part prompting the miners to
suspend some operations.
    Chile stocks hit their highest level in almost a
    Emerging markets showed little reaction to testimony from
Federal Reserve Chair Jerome Powell that suggested the U.S.
central bank will move faster when tightening policy.

    Key Latin American stock indexes and currencies:
                              Latest      Daily % change
 MSCI Emerging Markets         1243.54                0.91
 MSCI LatAm                    2133.96                2.53
 Brazil Bovespa              103406.27                1.43
 Mexico IPC                   53053.29                0.41
 Chile IPSA                    4387.10                   2
 Argentina MerVal             84585.39               1.002
 Colombia COLCAP               1405.27                0.79 Currencies             Latest      Daily % change
 Brazil real                    5.5889                1.47
 Mexico peso                   20.3776               -0.09
 Chile peso                      828.7                0.76
 Colombia peso                 3989.76                1.44
 Peru sol                       3.9017                0.48
 Argentina peso               103.5600               -0.06
 (Reporting by Susan Mathew in Bengaluru; Editing by Susan
Fenton and Jonathan Oatis)

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