EMERGING MARKETS-Latam currencies under pressure from firm dollar at end of rate decision-packed week

By Shashwat Chauhan

March 21 (Reuters) - Most Latin American currencies slipped on Friday as the dollar remained firm, wrapping up a week packed with interest rate decisions including in Brazil and the United States, with Colombia's peso on pace to be the week's biggest loser.

The dollar held on to its gains heading into the weekend after the Fed on Wednesday indicated that it was in no hurry to cut interest rates.

Fed Chair Jerome Powell said the Trump administration's initial policies, including extensive import tariffs, appear to have tilted the U.S. economy toward slower growth and at least temporarily higher inflation.

Brazil's real BRL= led losses in the region with a fall of 0.8%, though it was set for mild weekly gains after the country's central bank raised interest rates by 100 basis points for the third consecutive time. The Mexican peso MXN= lost 0.6%, down for a third straight day.

Chile's peso CLP= weakened 0.6% ahead of a local interest rate decision later in the day, with consensus tilted toward the central bank keeping its main lending rate at 5%.

"With inflation leveling off in Chile just below 5% - against an inflation target of 3% - further rate cuts are unlikely in 2025," said Thierry Wizman, global FX & rates strategist at Macquarie in a note.

"The stability of monetary policy is likely to induce some money market inflows in support of the CLP."

Colombia's peso COP=, down 0.2% on Friday, was on pace to be the worst performing currency in Latin America this week as local factors compounded losses.

The peso was hit hard after Colombian Finance Minister Diego Guevara announced his resignation on Tuesday, amid clashes over budget cuts and just hours after lawmakers rejected a labor reform championed by leftist President Gustavo Petro.

Uncertainty around U.S. trade policy and worries of an American economic slowdown have induced volatility in global markets, though stocks in emerging markets have fared much better than their U.S. counterparts.

MSCI's index for Latin American stocks .MILA00000PUS has jumped nearly 15% so far this year. In contrast, the U.S. S&P 500 .SPX has fallen more than 4%.

EM currencies have also flourished against a globally weak dollar, with an index for Latin American currencies .MILA00000CUS up almost 9% so far this year, while the dollar index =USD has fallen close to 4.4%.

However, on Friday, the stocks gauge fell 0.5%, while the currencies benchmark lost 0.8%.

On a year-to-date basis, Brazil's real stands as the best performing currency amongst EMs, while Turkey's lira TRYTOM=D3 and the Indonesian rupiah IDR= have fared the worst.

Turkish assets sold off for a third straight day, triggering two market-wide circuit breakers on Borsa Istanbul, as the lira, equities, and bonds extended losses following the detention of President Tayyip Erdogan's main political rival on Wednesday.

Debt markets in other frontier countries were also under pressure, with long-dated dollar bonds in Kenya and Egypt - to name just two - sliding more than 1 cent on the dollar, Tradeweb data showed.

Interest rate decisions from central banks in developed markets such as the Bank of England, the Bank of Japan and Sweden's Riksbank this week also reflected caution about the uncertainty around U.S. President Donald Trump's tariff plans.

The Russian central bank kept its benchmark interest rate on hold at 21% as expected and said more rate hikes were possible in future as inflationary pressures have decreased but remain high.

Key Latin American stock indexes and currencies: