EMERGING MARKETS-LatAm assets gain on weaker dollar, firming US rate cut bets

By Twesha Dikshit

Dec 3 (Reuters) - Latin American assets edged higher on Wednesday, building on the previous session's momentum, as investors assessed regional developments while global risk sentiment was uplifted with markets expecting a U.S. Federal Reserve rate cut next week.

The MSCI index tracking regional stocks .MILA00000PUS added 0.4%, while a similar gauge for currencies .MILA00000CUS rose 0.5%.

News that U.S. President Donald Trump's administration had abruptly cancelled interviews with finalists for the Fed chair job raised expectations that economic adviser Kevin Hassett would replace Jerome Powell when his term as chair ends in May next year. The expectations of a dovish tilt led to a bout of dollar selling that benefitted EM currencies.

"To us, it's not a huge mystery that risk-taking has firmed in the past few days. Even though the U.S. and global data have been lackluster, it has only strengthened traders' belief that the Fed will act on December 10 to reduce its fed funds target rate by 0.25%," Macquarie analysts said in a note.

EM assets have outperformed most global peers this year with a weaker dollar, cheaper equity valuations and asset diversification playing a favorable role in their rise.

The gap between developing nations' debt servicing costs and new financing hit a more than 50-year high of $741 billion between 2022 and 2024, the World Bank said.

BRAZIL, MEXICO UPDATES IN FOCUS

Brazilian President Luiz Inacio Lula da Silva said he expects further U.S. tariff cuts following a phone call between the two nations' leaders on Tuesday.

The real BRL= firmed 0.4% against the greenback, while equities .BVSP ticked higher, a day after the index surpassed 160,000 points for the first time.

With GDP data expected on Thursday, economic growth was forecast to have expanded modestly in the third quarter, according to most economists polled by Reuters.

Mexico's government said it would raise the minimum wage by 13% in 2026, the latest public policy from the second consecutive leftist government aimed at helping poor workers. The peso MXN= was little changed, while stocks .MXX dipped 0.4%.

Chilean equities .SPIPSA added 0.4% while the peso CLP= strengthened 0.3% ahead of the Andean nation's presidential runoff in mid-December. Argentina's S&P Merval .MERV rose 1.1%.

The Colombian peso COP= jumped 1.3% against the dollar while the MSCI COLCAP Index .COLCAP edged lower. The equity index has outperformed most peers this year but the rally could face some setbacks in the run-up to the 2026 presidential election.

Meanwhile, Poland's central bank delivered an interest rate cut as widely expected, bringing the rate down by 25 bps to 4% following benign inflation data.

The zloty EURPLN= was flat while the WIG20 Index .WIG20 dropped 0.9%.

Romanian stocks .BETI gained 1.1%. The country said its military blew up a maritime drone that was endangering navigation in the Black Sea.

Egypt's EGX 30 Index .EGX30 and Dubai's main index .DFMGI added 1.8% and 1.2%, respectively.

Key Latin American stock indexes and currencies at 15:07: