EMERGING MARKETS-Latam currencies slip after Fed leaves rates unchanged; Brazil in focus

By Purvi Agarwal and Johann M Cherian

Jan 28 (Reuters) - Latin American currencies slipped against a stronger dollar on Wednesday, after the U.S. Federal Reserve left interest rates unchanged as anticipated, while investors were also awaiting a monetary policy decision out of Brazil later in the day.

The dollar recovered earlier losses and firmed against a basket of currencies =USD after the U.S. central bank held interest rates steady, citing still-elevated inflation.

The greenback has weakened against most major emerging market currencies since U.S. President Donald Trump took office last year as a result of his erratic policy implementation methods.

"The weaker dollar can affect the Fed's view of imported inflation, but it's on the same scale as tariffs," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.

"A weaker dollar is a less disruptive means to the same end that Trump has been pushing for: favor U.S. exporters at the expense of importers. This is just another headwind to getting to 2%, but it's more like a gentle breeze than an outright gale."

Now the focus will shift to any announcements on who might be Trump's pick for the next Fed Chair at a time when he has berated the central bank for high borrowing costs.

In Latin America, the Brazilian real BRL= slipped 0.6% ahead of the central bank's monetary policy decision, which is expected to leave the Selic rate at the near two-decade-high of 15% in order to temper price pressures.

Separately, the country's Treasury expects public debt to grow as much as 19% this year, saying in its annual financing plan that it will boost sovereign bond issuance abroad, including in euro and in Chinese yuan.

More broadly, MSCI's index tracking Latin American currencies .MILA00000CUS was flat.

Mexico's peso MXN= slipped 0.7%, cooling from its biggest one-day jump since April on Tuesday. Chile's peso CLP= and Colombia's peso COP= depreciated the most, each falling more than 1% against the dollar.

Chile's regional central bank held rates steady at 4.50% on Tuesday, as expected.

Stocks in the region also gained, largely boosted by a slew of corporate earnings and rising commodity prices.

Brazil's Vale VALE3.SA gained 1.7% after its iron ore production rose to 336.1 million metric tons in 2025, surpassing rival Rio Tinto's Pilbara operations in Australia for the first time since 2018. The benchmark index .BVSP was up 0.8%.

Banorte GFNORTEO.MX gained 4% after the financial group said on Tuesday its fourth-quarter profit climbed 16% from a year earlier on strong consumer loan growth. Mexico's equities benchmark .MXX added 1%.

Argentine equities .MERV slipped 0.8%. Investors weighed the country's request at a New York court to suspend the discovery process in relation to state-owned oil company YPF's YPFDm.BA nationalization case, calling it illegitimate and intrusive. The oil major was flat.

Elsewhere in emerging markets, ratings agency Fitch downgraded Afreximbank to junk and withdrew future ratings — a final move in a relationship with the African lender that had become combative.

Key Latin American stock indexes and currencies: