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EMERGING MARKETS-Latam currencies inch higher as dollar falls from peaks

·3 min read

* Brazil retail sales down for third month in a row * Venezuela inflation races to 8.2% m/m in August * Lula's lead over Brazil's Bolsonaro slips 2 points - poll (Updates prices) By Anisha Sircar and Amruta Khandekar Sept 14 (Reuters) - Currencies in Latin America were buoyed by a softer dollar on Wednesday after U.S. producer price data soothed some nerves about inflation, though worries over the outlook for growth amid signs of a slowdown kept gains in check. The dollar slumped after data showed U.S. producer prices fell for second straight month in August, allaying some concerns of inflation becoming entrenched. The numbers followed a report on Tuesday that showed a surprise increase in monthly consumer prices in August, which boosted the dollar index to a one-week high and cemented expectations for a third 75-basis-point rate hike from the Federal Reserve next Wednesday. Latam markets have been volatile in recent weeks amid signs of domestic central bank tightening cycles drawing to a close, while angst around geopolitical risks, aggressive Fed policy tightening and acute price pressures have fueled a flight to safety. On Tuesday, Chilean and Argentine stocks rose, while most others declined, in line with a mixed session on Wall Street. "This period is very challenging for developing countries - equity participants are trying to determine when and if the Fed will pivot, which is a great unknown," said Greg Jones, senior vice president and portfolio manager at Alger. Brazil's real, the best performer among regional currencies so far this year, inched up 0.1% with gains kept in check by data that showed retail sales fell in July from June, marking the third consecutive monthly slump. "You've seen very aggressive rate increases across Latam, specifically Brazil. The last inflation data point shows that inflation may be peaking - there may be one more of 25 to 50 bps, but we could be close to the end of hiking in Brazil," added Jones. The real has also seen sharp fluctuations on the back of uncertainty ahead of presidential elections in October. Former Brazilian President Luiz Inacio Lula da Silva's lead over incumbent President Jair Bolsonaro has narrowed to 8 percentage points from 10, a new poll showed. Currencies of Mexico and Colombia also rose as oil prices ticked higher. But as copper prices slid amid higher hawkish Fed fears, currencies of top producer Chile and Peru fell. Elsewhere in the region, Venezuela's monthly inflation rate increased to 8.2% in August from 7.5% in July, according to data released by the central bank on Tuesday. Key Latin American stock indexes and currencies at 1829 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 962.08 -1.82 MSCI LatAm 2172.85 -0.21 Brazil Bovespa 110381.16 -0.37 Mexico IPC 46916.98 -0.26 Chile IPSA 5634.02 0.96 Argentina MerVal 145765.82 1.976 Colombia COLCAP 1226.62 -0.12 Currencies Latest Daily % change Brazil real 5.1819 0.14 Mexico peso 19.9449 0.61 Chile peso 919.5 -0.16 Colombia peso 4385.45 0.46 Peru sol 3.88 -1.03 Argentina peso 142.8700 -0.19 (interbank) (Reporting by Anisha Sircar, Amruta Khandekar and Susan Mathew in Bengaluru; Editing by Nick Zieminski and Jonathan Oatis)