EMERGING MARKETS-U.S. inflation relief proves short-lived for

By Susan Mathew Sept 14 (Reuters) – Emerging market currencies hit a session high on Tuesday after tamer than expected U.S. inflation data dented the dollar, but soon gave up gains as it left questions about the U.S. Federal Reserve’s next move. MSCI’s index of EM currencies gained as much as 0.2% after data showed underlying U.S. consumer prices rose at their slowest pace in six months. The dollar index, which measures the greenback against six major rivals, fell up to 0.4% as the data created uncertainty about the Fed’s stance on stimulus tapering. But the EM index soon gave up gains to trade flat. “While the inflation numbers might be the start of some “relief” and positive for high beta/risk currencies, we think the market will need to get through the Fed meeting first before it can break “free”,” strategists at TD Securities said. In Latam, Brazil’s real fell back into the red shortly after the inflation data. While prospects of further interest rate hikes lend some support, political tensions ahead of elections next year are weighing on the currency and companies have cited this as a new risk factor for initial public offerings in Brazil. Brazil’s central bank is likely to intervene in the currency market due to seasonal demand for dollars concentrated near the end of the year, its chief Roberto Campos Neto said. Meanwhile, Japan’s SoftBank Group renewed its LatAm bet, launching a $3 billion fund to invest in technology companies in the region. Mexico’s peso retreated further from four-week highs, down 0.2%. The currency, which has largely been on an upward trend, has gained 2.5% over the last 12 sessions. Ratings agency Fitch on Monday warned that Mexico’s weakening governance is raising credit uncertainties, citing energy, utilities, infrastructure and financial institutions as the most affected. In Chile, indigenous communities living around the Atacama salt flat have asked authorities to suspend lithium miner SQM’s operating permits or sharply reduce its operations until it submits an environmental compliance plan acceptable to regulators. Shares in the world’s No. 2 producer of lithium, which is used in batteries for electric vehicles, were flat. Brazil’s BTG Pactual jumped almost 3% on a report that Singapore’s state investor GIC Pte Ltd is investing $421 million into the lender’s private equity fund which controls Brazilian fiber optic company V.tal. Key Latin American stock indexes and currencies at 1429 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1296.89 -0.36 MSCI LatAm 2414.83 -0.43 Brazil Bovespa 116501.66 0.08 Mexico IPC 51443.23 -0.1 Chile IPSA 4424.78 0.53 Argentina MerVal 79985.45 -0.1 Colombia COLCAP 1309.34 -0.24 Currencies Latest Daily % change Brazil real 5.2350 -0.24 Mexico peso 19.8980 -0.17 Chile peso 785.1 -0.10 Colombia peso 3823.62 0.12 Peru sol 4.1 -0.10 Argentina peso 98.2200 -0.03 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Alexander Smith)