EMERGING MARKETS-Latam assets edge higher on commodity support, focus on Fed

By Johann M Cherian and Niket Nishant

Oct 29 (Reuters) - Stocks and currencies of resources-rich economies in Latin America rose on Wednesday, tracking stronger commodity prices, while investors awaited a monetary policy decision by the U.S. Federal Reserve later in the day.

Investors globally were relieved by signs of thawing trade tensions between economic superpowers U.S. and China, as U.S. President Donald Trump hinted that he could reduce tariffs on Beijing when he meets Chinese President Xi Jinping on Thursday.

Trump also said he had reached an agreement with South Korea, following which a U.S.-listed exchange-traded fund tracking Korean equities EWY.P rose 2.8%, while the won KRW= firmed 0.6% to 1,422 per dollar - its highest in one week.

"The deal improves the outlook for Korea’s economy at the margin and adds to the reasons to think that the Bank of Korea will refrain from further monetary easing over the rest of this year," said Jason Tuvey, deputy chief emerging markets economist for Capital Economics.

REAL BOOST FROM HIGHER IRON ORE PRICES

Higher crude oil prices also underpinned gains in currencies of oil majors Colombia COP= and Mexico MXN=, while firmer copper prices also lifted currencies of top exporters in the region such as Chile's peso CLP= and Peru's sol PEN=.O/R MET/L

Chile's peso also found support from the local central bank's decision on Tuesday to leave benchmark interest rate unchanged at 4.75%.

A broader index tracking regional currencies .MILA00000CUS inched up 0.2% to an all-time high against the dollar =USD. An index tracking regional bourses .MILA00000PUS also gained 0.7% to touch its highest since April 2024.

US RATE CUT PRICED IN

Focus is also on the U.S. Federal Reserve's monetary policy verdict, with markets pricing in a 25 basis points interest rate cut. A dovish move could be a boost for emerging market currencies as the dollar weakens.

Meanwhile in Argentina, assets continued to advance, aided by the newfound strength from President Javier Milei's mid-term election victory over the weekend.

The Merval stocks index .MERV rose 3.7%, most dollar bonds were marginally higher, while the peso ARS= firmed 1.3% to 1,452 per dollar.

"Counterintuitively, there's more uncertainty in Argentina compared to its Latin American peers. There aren’t any decisive elections in the next two years and the path is open towards growth. And it has really attractive valuations," said Malcolm Dorson, head of emerging markets at Global X ETFs.

COURT DECISION COULD HIT DEBT-LADEN ARGENTINA

However, investors continued to factor in bearish bets on the peso, expecting that the currency could depreciate close to 2,000 per dollar over the next 12 months.

Focus will be on a U.S. appeals court verdict later in the day that will consider whether Argentina must pay investors $16.1 billion after seizing control of YPF YPFDm.BA more than a decade ago. The state-owned oil company's shares rose 1.2%.

A ruling favoring investors could further cripple the debt-ridden economy.

Elsewhere, Jamaican dollar bonds US470160AV46=TE, US470160CA80=TE were down 2.6 cents and 1.4 cents on the dollar as investors weighed the potential costs to the country in repairing the extensive infrastructure damage caused by Hurricane Melissa.

Key Latin American stock indexes and currencies: