EMERGING MARKETS-Latam FX mixed, stocks higher after Fed holds rates; Turkish assets slide

By Shashwat Chauhan and Purvi Agarwal

March 19 (Reuters) - Latin American currencies were mixed on Wednesday after the U.S. Federal Reserve left interest rates unchanged and projected two cuts this year, while Turkish assets took a hit after authorities detained President Tayyip Erdogan's main political rival.

The Fed held interest rates steady but the central bank's policymakers indicated they still anticipate reducing rates by half a percentage point by end-2025 in the context of slowing economic growth and eventually, a downturn in inflation.

"The Fed remains in no hurry to cut interest rates, but President Trump's spending cuts and trade protectionist policies are hurting growth prospects and will likely force the central bank's hand later in the year," said James Knightley, chief international economist at ING.

The dollar =USD was 0.2% higher, pressuring some Latin American currencies such as the Mexican peso MXN= and Colombia's peso COP= that fell 0.8% each.

Turkish assets were hit hard after authorities detained Istanbul mayor Ekrem Imamoglu, the main rival of President Tayyip Erdogan, on charges of corruption and aiding a terrorist group in what the main opposition party called "a coup against our next president".

The lira TRYTOM=D3 plunged as much as 12.7% earlier in the day to a record low of 42 per dollar, marking its worst day since June 2023. Local stocks .XU100 closed 8.7% lower while its international bonds also saw heavy selling pressure.

Turkish Finance Minister Mehmet Simsek said that everything necessary is being done to ensure the markets are functioning healthily after the slide, without giving any further details.

The central bank sold a record amount of foreign currency on Wednesday, according to calculations by three bankers.

"There were very strong signs that Turkish assets would be giving positive real interest rates, but now there is currency volatility," said Emre Akcakmak, head of frontier markets and portfolio adviser with East Capital Group, also pointing that an interest rate cut was potentially off the table now.

"Foreign investors will likely be discouraged by all these uncertainties."

The central bank cut rates for the first time in December after an 18-month tightening effort that had reversed years of unorthodox policy and easy money backed by Erdogan.

Back in LatAm, Brazil's real BRL= firmed 0.4% ahead of a local interest rate decision later in the day, when it is widely expected to hike rates to bring the Selic rate to 14.25%.

Brazil's government kept its economic growth forecast for this year unchanged at 2.3%, while slightly increasing its inflation estimate.

Chile's peso CLP= held firm at 916.35 per dollar, with an interest rate decision expected on Friday.

MSCI's index for Latin American currencies .MILA00000CUS was slightly higher, while the stocks gauge .MILA00000PUS gained 1%, trading at its highest since early November.

Heavyweight Brazil .BVSP added 0.8%, while Mexican stocks .MXX were up 0.5%. Argentina's Merval .MERV jumped 3.7%, as the country's IMF deal faced a key vote in the local Congress.

Elsewhere, Ukraine's international bonds and the Russian rouble RUB= fell after Russian President Vladimir Putin agreed on Tuesday to stop attacking Ukrainian energy facilities temporarily but declined to endorse a full 30-day ceasefire.

U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskiy agreed to work together to end Russia's war with Ukraine, in what the White House described as a "fantastic" one-hour phone call.

Highlights:

Argentina's 2024 economy shrinks 1.7% despite late-year rebound

*Panama's economic growth slows to 2.9% in 2024 after key mine closure

Key Latin American stock indexes and currencies around 1950 GMT: