By Aaron Saldanha May 2 (Reuters) - Latin American currencies softened against a solid U.S. dollar on Thursday, a day after the U.S. Federal Reserve kept interest rates steady and its Chair Jerome Powell said policymakers saw no strong reason to raise or lower rates.
Most stock markets in Latin American broadly fell along with their global peers, hurt especially sharply by weakness among energy stocks on diving oil prices.
MSCI's index of Latin American currencies fell 1.1%, pressured by the resolute dollar, and was on track for its worst day in more than a month.
Powell's comments prompted interest rate markets to reduce the priced-in expectation of seeing lower U.S. borrowing costs by the end of 2019, supporting the dollar.
There was nothing from the policy statement or the press conference to indicate the Fed was contemplating any near-term changes to monetary policy, HSBC US Economist Ryan Wang wrote in a note.
Brazil's real slid 1.3%, on course for its worst one-day showing in more than a week. Growth in Brazilian manufacturing activity slowed in April to its weakest pace in six months, data showed.
Brazilian stocks dropped 0.7%, weighed by losses across most sectors.
Prices of some local stocks adjusted for moves seen in their corresponding American depository receipts (ADR) on Wednesday, when equities in Sao Paulo did not trade due to a holiday for Labor Day.
Local shares of iron ore miner Vale SA fell 2.5%, following Wednesday's 3.1% slide in its ADR.
State-run oil firm Petroleo Brasileiro SA (Petrobras) saw its common shares and preferred shares fall 1.2% and 1.6%, respectively, amid a slide in oil prices and a 2% fall on Wednesday in Petrobras' ADRs.
The Mexican peso softened 0.4%. The high-yielding currency is popular among carry traders, who invest in it using funds borrowed in low interest rate currencies, pocketing the difference.
The peso has been broadly weaker over the past two weeks. Simon Harvey, an FX market analyst at Monex Europe, said the emerging market carry trade was "starting to seem like a crowded trade." Argentina's peso softened, while stocks rose 2.3%, largely on gaining financials.
Colombia's peso weakened 0.9%, while stocks slid 0.5%. Energy firm Ecopetrol SA tumbled 2.5%, hit by weaker oil prices.
Latin American stock indexes and currencies at 1424 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1080.18 -0.03 MSCI LatAm 2722.81 -1.62 Brazil Bovespa 95680.25 -0.7 Mexico IPC 44483.14 -0.26 Chile IPSA 5173.01 -0.27 Argentina MerVal 30240.95 2.26 Colombia IGBC 12712.26 -0.51 Currencies daily % change Latest Brazil real 3.9644 -1.07 Mexico peso 19.0743 -0.42 Chile peso 684.3 -1.13 Colombia peso 3262.28 -1.07 Peru sol 3.313 -0.21 Argentina peso (interbank) 44.8000 -1.14 (Reporting by Aaron Saldanha in Bengaluru; Editing by Bernadette Baum)