EMERGING MARKETS-Brazil’s real slips ahead of cenbank meeting

* Comments from head of Brazil’s cenbank worry -trader * Brazilian real underperforms Latam peers for the week * Argentinian markets in pending mode -trader * Brazilian Vale declares exceptional dividend in first half By Susan Mathew 17 September (Reuters) – The Brazilian real fell 1% to lead losses in Latin American currencies on Friday with all eyes on the central bank’s policy meeting next week, while mining major Vale said an exceptional dividend of 7.6 billion dollars in the first half. The real is down about 1.7% for the week, the worst performance among regional peers. Next week, the central bank is expected to raise interest rates by 100 basis points as inflation rises. But traders are cautious after central bank chief Roberto Campos Neto said earlier this week that he would not change his plans with every indicator showing high inflationary pressures, signaling he could hint at a ceiling for the current tightening cycle. “Neto’s comments seem to indicate that there is no point in fighting inflation with more rate hikes,” said Juan Perez, a senior currency traded at Tempus Consulting. “It scares the traders because the idea was to bet on a tightening, but the official’s lack of concern makes many think they are going to stop.” Political sentiment also weighed on the real as investors feared President Jair Bolsonaro’s populist policies as his popularity waned ahead of next year’s election. Bolsonaro on Thursday signed an executive order to raise taxes on financial transactions – levied on credit, foreign exchange transactions, insurance transactions or bonds or securities – for three months to pay for the so-called protection program against the Auxílio Brasil pandemic. The Mexican peso held steady, while the Colombian peso fell 0.5% on falling oil prices. Markets in Chile have been closed for a public holiday. In Argentina, the benchmark 2035 dollar-denominated sovereign bond fell slightly. Argentina’s center-left President Alberto Fernandez called for unity on Thursday after a rebellion of far-left ministers threatened to shatter the ruling coalition following a deadly defeat in a primary election in mid-term. “The markets will likely be on a wait-and-see approach as the government tries to take the reins,” said Perez of Tempus. Among stocks, iron ore miner Vale gave up fleeting gains to lose nearly 3% and hit seven-month lows, following a 7% drop in steel ingredient prices. The company on Thursday evening declared a dividend of 40.2 billion reals, or 8.11 reais ($ 1.54) per share, its biggest payout since the miner’s dam collapsed in 2019. The Bovespa stock index de Sao Paulo fell 1.7%, extending the losses to a fourth consecutive session. It was expected to underperform its Latam peers over the week, down nearly 2%. Salvadoran bonds are seen after falling in last session amid fears the country will fail to meet a potential $ 1 billion loan deal with the International Monetary Fund and face negative credit implications from its use bitcoin. Main Latin American stock indices and currencies at 14:33 GMT: Stock market indices Latest daily changes in% MSCI Emerging markets 1,278.07 0.1 MSCI LatAm 2,322.70 -2.44 Brazil Bovespa 111,913.54 -1.65 Mexico CPI 51,921.29 -0.52 Argentina MerVal 79,935.55 0.248 Colombia COLCAP 1317.73 -0.43 Currencies Latest daily% exchange Brazilian real 5.3365 -1.36 Mexican peso 19.9730 -0.21 Colombian peso 3831, 88 -0.45 Peruvian sol 4.1034 -0.27 Argentine peso 98.3300 -0.01 (interbank) (Report by Susan Mathew in Bengaluru; edited by Dan Grebler)