EMERGING MARKETS-LatAm assets advance on rising US rate-cut bets; Brazil's inflation falls within target

By Twesha Dikshit and Niket Nishant

Nov 26 (Reuters) - Latin American stocks and currencies advanced on Wednesday, continuing their upward momentum on the back of firming expectations that the Federal Reserve will cut rates in December, while Brazil's annual inflation fell within the central bank's target for the first time since January.

Emerging market assets have come under pressure in recent days, with last week's selloff mirroring global risk-off sentiment on concerns of overvalued technology stocks and uncertainty over the Fed's monetary policy.

The MSCI index tracking regional stocks .MILA00000PUS climbed 1.5%, while the broader index of regional currencies .MILA00000CUS added 0.4%.

Renewed efforts toward a Ukraine peace deal, release of delayed official U.S. data and dovish commentary from Fed officials have been closely scrutinized by investors this week.

Brazil's annual inflation was within the central bank's target range in early November, according to official data, fuelling expectations of an interest rate easing cycle.

The benchmark Bovespa Index .BVSP advanced 1.2% while the real BRL= strengthened 0.2% against the dollar.

"While the relative hawkishness of COPOM's (Brazilian central bank) latest communications rule out a cut at the next meeting in December, we think that falling inflation (and expectations), the recent bout of weak activity data and the strength of the real mean that the central bank is likely to kick-off its easing cycle in January," said Capital Economics' emerging market economist Kimberley Sperrfechter in a note.

With Brazil's policy rate at its highest level since the mid-2000s, Capital Economics economists estimate the end-2026 Selic rate at 11.25% compared to the current 15%.

A Reuters poll showed expectations that Latin America's largest economy could see a winning streak for its stocks before facing volatility ahead of next year's presidential vote.

Meanwhile, the same poll showed estimations of Mexico's IPC stock index .MXX rising 8.7% to 67,950 points at the end of 2026, on expectations of a renewal of the USMCA trade deal next year.

Mexican stocks rose 0.2%, while the peso MXN= firmed 0.2%.

Colombia's equities .COLCAP climbed 0.7%, while the peso COP= strengthened 0.3% against the greenback.

Argentina's peso ARS= firmed 0.1% against the dollar, while the S&P Merval Index .MERV rose 0.7%, a day after economic activity growth surpassed expectations for September.

Elsewhere, South African assets jumped after muted U.S. economic data further boosted hopes of a Fed rate cut. The rand ZAR= advanced 0.4% against the greenback, while stocks .JTOPI gained 1.6%.

Key Latin American stock indexes and currencies at 1447 GMT: