EMERGING MARKETS-Strong dollar hits Latam FX, Russian assets rise
* Dollar jumps eyeing Fed rate hikes * Russian stocks jump, rouble retraces some declines * S.African rand falls as c.bank delivers 'measured' rate hike * Chile's peso slips back after 150-bps rate hike (Adds comments, updates prices throughout) By Susan Mathew and Shreyashi Sanyal Jan 27 (Reuters) - Latin American currencies weakened on Thursday after the dollar jumped following the Federal Reserve's signal to raise interest rates soon, while Russia's rouble jumped after the Kremlin left the door open for dialogue over the Ukraine crisis. Mexico's peso dipped 0.2%, giving back gains from earlier in the session, while Brazil's real remained range bound. Chile's peso fell 0.3% after rising 1% following the central bank's surprise 150-basis-point hike to its key lending rate at 5.5% overnight, more than the 125 basis points expected by markets. "The decision by Chile's central bank to deliver a surprisingly large 150bp rate hike yesterday, to 5.50%, supports our view that the tightening cycle will go further than the path it had previously signaled," said Nikhil Sanghani, emerging markets economist at Capital Economics. "We think that the dramatic upward shift in investors' rate expectations has probably gone a bit too far." Moody's on Thursday said Chile's newly elected administration's rejection of additional pensions withdrawals is credit-positive. Further pressuring emerging market currencies was a stronger dollar and higher U.S. Treasury yields following hawkish Federal Reserve commentary that spurred bets of five or more rate hikes this year. Strong U.S. economic growth data on Thursday lent weight to the speculations. The rouble, however, jumped 2% to 77.8 a dollar, retracing losses that pushed it beyond 80 on Wednesday. Kremlin spokesman Dmitry Peskov said U.S. and NATO statements that Russia's main demands around post-Cold War security arrangements in Europe were unacceptable did not leave much room for optimism, but stopped short of closing the door on diplomacy. Russia said a pullback in NATO military forces from Eastern Europe would help reduce military tensions in the region. Sovereign dollar bonds issued by Ukraine and Russia rose, and the cost of insuring exposure to Russia eased. Russia's main stocks index jumped 2.9%. "We think Russian assets would not sell off as much this time around, unless the worst-case scenario materializes," said strategists at TD Securities. "We believe that the (central bank) is aware of these risks and, while likely downplaying them in official communications, may adjust the trajectory of monetary tightening to pre-empt future moves," they said on Wednesday, adding they now expect a 100-basis-point hike from the central bank next month. Meanwhile, Xiomara Castro was sworn in as Honduras' first female president, and faces tests over a sharply divided Congress and relations with China. South Africa's rand fell 1.1% after the country's central bank raised interest rates by the expected margin and suggested it would only increase rates gradually in the future. China's yuan dropped 0.7%, while Turkey's lira lost 0.4% Key Latin American stock indexes and currencies at 1952 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1190.71 -1.71 MSCI LatAm 2245.13 0.04 Brazil Bovespa 112018.97 0.66 Mexico IPC 50520.36 -1.01 Chile IPSA 4562.74 0.23 Argentina MerVal 86097.87 0.368 Colombia COLCAP 1520.98 -0.08 Currencies Latest Daily % change Brazil real 5.4232 0.27 Mexico peso 20.7876 -0.27 Chile peso 802.3 -0.22 Colombia peso 3956.63 -0.82 Peru sol 3.8274 -0.06 Argentina peso (interbank) 104.7600 -0.05 Argentina peso (parallel) 219.5 0.68 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; editing by Jonathan Oatis)
