Latam FX hurt by firmer dollar, slipping commodity prices

Most currencies in resources-rich Latin America fell against a broadly firmer dollar on Wednesday as commodities such as copper and crude oil lost steam, while Chile's peso lagged peers ahead of an expected interest rate cut.

Chile's peso USDCLP, the currency of the world biggest copper producer, shed 1.8% against the dollar with prices of red metal coming under pressure as funds locked in profits from a rally to record highs that has curbed industrial consumers' appetite to buy the metal.

Later in the day, Chile's central bank is widely expected cut its interest rate by 50-basis points to 6%. The bank slashed the rate by 75-bps at its last meeting.

"I'm curious to see if they really need to add any additional stimulus to the economy because you're starting to see credit growth bottom out and some measures of inflation possibly turning as well," said Mike Arno, EM portfolio manager at Brandywine Global.

Fellow copper producer Peru's sol USDPEN also fell 0.6%.

Meanwhile, the dollar index DXY firmed in the lead-up to the release of minutes from the Federal Reserve's latest policy meeting.

In recent days, a number of Fed policymakers have said the U.S. central bank should wait several more months to ensure that inflation really is on track to hit its 2% target before cutting interest rates.

"We will see some softening inflation over the next few prints, which should be supportive of the Fed cutting rates, which would be supportive of risk assets," Arno added.

Brazil's real USDBRL dipped 0.8%, while currencies of oil producing nations also came under pressure amid declines crude prices.

Mexico's peso USDMXN shed 0.2%, while Colombia's peso USDCOP lost 0.4%.

Brazil's Finance Minister Fernando Haddad said he is afraid that the climate tragedy in Rio Grande do Sul will be used as an argument in favor of monetary tightening, stating that the current level of the Selic rate is still very restrictive.

Most South American stock indexes also dipped, with MSCI's index for Latin American stocks (.MILA00000PUS) down 1.8%, hitting a three-week low.

Brazil's Bovespa IBOV fell around 1% and Mexican shares ME lost 0.8% a day after an over 1% fall, while Colombia's benchmark index (.COLCAP) was down over 1% as well.

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Key Latin American stock indexes and currencies: