* Market should price hiking cycle in Colombia this year -
Citi
* S&P raises economic growth forecast for Brazil, Mexico
* $2 billion boost to health spending in Chile as COVID
cases rise
(Adds details, updates prices)
By Susan Mathew and Ambar Warrick
June 29 (Reuters) - Colombia's currency was set for its
worst session in two months on Tuesday, a day after the central
bank held interest rates as expected, while Latin American
currencies fell as resurgent pandemic fears sent investors to
the safety of the dollar.
The Colombian peso fell for the first time in four
sessions, down 1.7% at 3,764.5 to the dollar, after Monday's
rally.
Colombian interest rates were kept at a record low 1.75%,
and the bank held an expansionary stance as the country battles
a third COVID-19 wave, while anti-government protests have
disrupted the movement of goods across the country.
Citi noted that central bank chief Leonardo Villar's
statement that decisions are made on a month-by-month basis
suggested that there was no commitment to keep low rates for an
extended period.
"This makes the overall tone neutral in our view, though
some market participants are bound to read it as dovish given
... some were expecting either a hike or a more hawkish tone
from the board," Citi said. The market should continue to price
a hiking cycle this year and as early as the third quarter, it
added.
The bank could also possibly mirror hawkish signals from
Brazil, Mexico and Chile, with inflation expected to heat up
this year.
Brazil's real fell 0.2% as the dollar made healthy
gains on risk aversion, with the highly infectious Delta variant
of the coronavirus spurring fears of global economic disruption.
In Brazil, President Jair Bolsonaro's popularity has been
hitting lows as citizens question his leadership with more than
500,000 fatalities from the virus in Brazil.
Data from the Getulio Vargas Foundation, a Brazilian think
tank, showed consumer prices appeared to be declining in the
country, due to recent real strength and falling commodity
prices.
Ratings agency S&P trimmed its overall growth forecast for
emerging market currencies on Monday, citing slow vaccine
rollouts as the biggest risk. However, it raised Brazil's
economic growth estimate to 4.7% from 3.4% and Mexico's to 5.8%
from 4.9%.
Mexican financial authorities said on Monday that crypto
assets are not legal tender in Mexico and their use could invite
sanctions.
Chile on Monday announced a $2 billion boost to health
spending to address the coronavirus pandemic. But the Chilean
peso fell, tracking weakness in copper prices.
Latin American stocks also retreated, as the risk-off
sentiment extended to global equities.
Peruvian markets were closed for a holiday.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1374.99 -0.43
MSCI LatAm 2652.04 -0.35
Brazil Bovespa 126790.53 -0.5
Mexico IPC 50348.19 -0.01
Chile IPSA 4302.64 -1.08
Argentina MerVal 63628.93 -0.814
Colombia COLCAP 1263.20 -0.6 Currencies Latest Daily % change
Brazil real 4.9369 -0.20
Mexico peso 19.8070 0.07
Chile peso 736.3 -0.25
Colombia peso 3764.5 -1.71
Argentina peso 95.6900 0.00
(interbank)
(Reporting by Susan Mathew and Ambar Warrick in Bengaluru;
editing by Jonathan Oatis and Richard Chang)
