Most Latam currencies, stocks climb as dollar slides after Powell speech

Most Latin American currencies and stock indexes jumped on Wednesday as commodity prices rose and dollar slid after the Federal Reserve chair Jerome Powell signaled slower pace of interest-rate hikes as early as next month to battle inflation.

The dollar index DXY dropped nearly 1%. The greenback has rallied sharply this year partially due to it safe haven status amid Russia-Ukraine conflict and prospects of aggressive monetary policy tightening by the U.S. central bank.

Powell said the Fed has been "pretty aggressive" already with its rate hikes and won't try to crash the economy with further sharp increases just to get price rises under control faster.

Though he warned that the fight against inflation was far from over and key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

The MSCI's index for broader emerging market stocks EEFS rose 2.3%, while currencies (.MIEM00000CUS) added 0.8%. Latin American stocks (.MILA00000PUS) and currencies (.MILA00000CUS) jumped 2.9% and 1.3%, respectively.

"The big take-away is (Fed Chair Powell) signaling (the next interest rate hike) is going to be 50 basis points," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

"The terminal rate is a moving target and taking your foot off the gas doesn't mean this is the last increase. They are willing to slow things down a bit... They are going to be data dependent and see where the data leads."

Latam stocks were down 0.3% in November compared to the 14.9% jump in broader EM stocks index EEFS that has put the latter on track for their best month since May 2009.

The real <BRL=> gained 1.5% against the dollar on Wednesday, trimming most of its monthly losses suffered due to fiscal policy concerns surrounding President-elect Luiz Inacio Lula da Silva's economic plan.

Economist Nelson Barbosa said on Wednesday Brazil's fiscal framework under Lula should be able to absorb economic shocks.

"Real had a good run for a while before November, tons of volatility ahead and after elections," said Juan Perez, director of trading at Monex USA in Washington.

"Now, overall it seems underlying prices of commodities and planning for production are coming down in costs."

Copper exporters Chile's peso USDCLP and Peru's sol USDPEN added 1% and 0.3% against the dollar. Copper output in Chile, the world's largest producer of the metal, rose 2.2% year-on-year to 485,447 tonnes in October, said the country's statistics agency INE.

In Peru, political turmoil continues to weigh as opposition legislators launched third impeachment motion against President Pedro Castillo since he took office last year.

Mexico's peso USDMXN slipped 0.2%. The Bank of Mexico forecast that headline inflation likely peaked in the third quarter and was seen declining throughout the remainder of this and next year, while also projecting stronger economic growth for 2022 and 2023.

Key Latin American stock indexes and currencies at 2027 GMT: