EMERGING MARKETS-Latam currencies pressured by firm dollar after week of rate decisions

By Shashwat Chauhan and Purvi Agarwal

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.

The dollar index =USD held on to its gains heading into the weekend after the U.S. Federal Reserve on Wednesday indicated that it saw no rush to cut interest rates.

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

Trump hinted at some flexibility on tariffs on Friday, though the details remained unclear.

The higher dollar weighed on Latam currencies, with the Brazilian real BRL= leading losses in the region. It fell 0.6% and was set for a slight weekly decline.

Brazil's central bank raised interest rates by 100 basis points, but signaled smaller hikes going forward.

The Mexican peso MXN= lost 0.5%, set for its biggest weekly loss since late January.

Chile's peso CLP= weakened 0.2% ahead of an 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.

However, Citigroup analysts said, "we believe the central bank could still opt for a total 50bps in cuts in 2025, which we pencil in as two 25bps in the last two quarters of the year.

"Delays in Fed cuts could delay Chile's central bank moves, or lead to a change of guidance towards a higher terminal rate."

Colombia's peso COP= bucked the trend, gaining 0.7%, but was on pace to be the worst performing currency in Latin America this week.

The currency 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.

Meanwhile, a report said the International Monetary Fund will discuss a new $20-billion loan for Argentina in an informal meeting next week. The peso ARS= was flat.

Uncertainty around U.S. trade policy and worries of an American economic slowdown have induced volatility in global markets.

MSCI's index for Latin American stocks .MILA00000PUS was down 0.4%, along with the currencies index .MILA00000CUS, which was on track to log its first weekly loss in three weeks.

Regional stocks were mixed, while Argentina's Merval .MERV gained 2.5%.

On a year-to-date basis, Brazil's real stands as the best performing currency among emerging markets, 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 sliding more than 1 cent on the dollar, Tradeweb data showed.

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

Key Latin American stock indexes and currencies: