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EMERGING MARKETS-Latam stocks, currencies rise ahead of Fed outcome

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* Colombian peso set to end eight-session losing streak * Moody's downgrades Pemex further into junk * Brazil's capacity utilization hits highest in 7 years * FEMSA, WEG rally after results * Peru's Casitllo to assume Presidency on Wednesday By Susan Mathew July 28 (Reuters) - Most Latin American currencies and stocks rose on Wednesday, with Colombia's peso looking to end its longest losing streak in more than 2-1/2 years, ahead of the U.S. Federal Reserve's policy decision later in the day. Rising oil prices helped currencies of crude exporters Mexico and Colombia rise 0.1% and 0.2% respectively against a stronger dollar. The Fed decision due at 2:00 p.m. (1800 GMT) will be watched for hints on stimulus tapering. Massive stimulus measures and ultra-loose monetary policy from major central banks have helped inflows into riskier assets amid pandemic-induced uncertainty. "Barring an unexpectedly hawkish message (from the Fed), we are inclined to a neutral-to-slightly weaker U.S. dollar," said FX strategists at TD Securities. Colombia's peso lost 3.5% over the last eight sessions, weighed by anti-government protests, which started over discontent with a tax reform bill, and underlying economic weakness from the pandemic that cost Colombia two out of three of its investment-grade debt ratings. On ratings, Moody's on Tuesday downgraded Mexico's Pemex deeper into junk territory, criticizing the heavily indebted fallen angel's plans to expand refining capacity. Pemex's finances have weighed on Mexico's sovereign credit rating. But Mexico's peso still presents value at current levels, and its carry trade appeal remains attractive thanks to a relatively hawkish market view on the central bank, TD strategists said. Brazil's real led gains in the region, up 0.3%. Inflation pressures in Brazil surged to historic highs in June, data showed on Wednesday, strengthening expectations of interest rate hikes. The key rate is expected to rise to 7.00% this year. Separate data showing Brazilian industry in July operated at its hottest level in almost seven years instilled confidence about improvement in Brazil's economic fundamentals. Political headwinds are gathering , however, as President Jair Bolsonaro's popularity slides ahead of an election next year. Peruvian markets were closed for a holiday. Socialist Pedro Castillo is set to assume the presidency of a deeply divided nation at 1500 GMT on Wednesday. The make-up of his cabinet and his first address are awaited. The sol has lost almost 8% so far this year, with almost all of it made after Castillo's surprise win in the first round vote in April. Copper producers of the world's second biggest producer of the metal are fearful of his plans to hike taxes on mining. Among stocks, Mexican conglomerate Femsa and Brazilian motor maker WEG rallied after reporting strong quarterly results. MSCI's index of Latam stocks rose 0.7% to scale near two-week highs. Key Latin American stock indexes and currencies at 1445 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1264.80 0.99 MSCI LatAm 2552.89 0.38 Brazil Bovespa 125168.98 0.45 Mexico IPC 50979.98 0.14 Chile IPSA 4150.51 0.08 Argentina MerVal 66012.46 0.493 Colombia COLCAP 1242.54 -0.57 Currencies Latest Daily % change Brazil real 5.1564 0.33 Mexico peso 19.9647 0.03 Chile peso 766.3 -0.07 Colombia peso 3922.32 0.14 Peru sol 3.925 0.00 Argentina peso 96.6200 -0.05 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Alex Richardson) 

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