Latin American markets close sharply lower after Fed’s Powell comments on rates

By Nelson Bocanegra

BOGOTÁ, March 7 (Reuters) – Latin American markets closed on sharp devaluations on Tuesday in reaction to comments by Federal Reserve Chairman Jerome Powell on a possible further tightening of monetary policy in the United States, which has fueled investors’ appetite for the dollar.

* Weeks away from the Fed’s policy meeting, Powell told Congress that the Fed may have to raise rates more than expected and is prepared to do so in longer steps if available information warrants tougher measures to control inflation.

* “Once again, the ‘hawkish’ bias of US monetary policy is the main source of volatility for local assets,” says a note from the Banco de Bogotá.

* “We are waiting for what can happen with next Friday’s jobs report, as another upside surprise in US hiring could reaffirm this bias and the devaluation of risky assets,” he added.

* The falls were led by the Chilean peso, which reversed slight early gains and closed the day down 1.51% at 802.10/802.40 units to the dollar. At the same time, the main index of the Santiago Stock Exchange, the IPSA, fell by 0.44%, to 5,403.44 points.

* It was closely followed by the Colombian peso with a depreciation of 1.42% to 4,771.25 units per dollar; while the stock index of the local stock exchange, the MSCI COLCAP, climbed 0.09% to 1,236.75 points.

* The Mexican peso fell 0.85% to 18.1375 units to the dollar on its second day of decline; and the main S&P/BMV IPC stock index lost 1.5% to 53,108.53 points.

* In Brazil, the real fell 0.79% to 5.1943 units to the dollar and the Bovespa stock market index fell 0.54% to 104,131.30 points.

* The Peruvian currency, the sol, depreciated 0.32% to 3.795/3.798 units per dollar. At the same time, the benchmark index of the Lima Stock Exchange fell by 0.92% to 569.99 points.

* In Argentina, the peso fell 0.23% to 199.80 units to the dollar; while Argentina’s main S&P Merval index fell 2.57%.

(Reporting by Nelson Bocanegra, additional reporting by Froilán Romero and Vicente Valdivia in Santiago)