EMERGING MARKETS-Latam FX slips as dollar strengthens on rate hike worries

(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window) * Mexico’s retail sales rise 0.1% in Dec from Nov * Peru’s prosecutor opens corruption probe of ex-president * Latam FX off 0.2%, stocks down 0.8% * Broader EM FX off 0.4%; Israeli shekel nears three-year low (Updates prices; adds details, comments) By Amruta Khandekar and Bansari Mayur Kamdar Feb 21 (Reuters) – Latin American currencies slipped against a stronger dollar on Tuesday as focus turned to minutes from the Federal Reserve’s latest meeting to be released later in the week after strong U.S. economic data bolstered fears of a more hawkish monetary policy. The dollar index rose 0.3% by 1933 GMT after data showed U.S. business activity unexpectedly rebounded in February, highlighting the resilience of the U.S. economy and stoking concerns the Fed may need to hike interest rates by more than expected. MSCI’s index for Latin American currencies slipped 0.2% after three straight sessions of gains, while stocks in the region fell 0.8%. Investors are awaiting minutes from the Fed’s first meeting of 2023, due out on Wednesday. “The Fed minutes will be more closely watched than ever as the market looks for every clue as to the likely path of Fed rates between here and the terminal rates,” said Christian Lawrence, senior market strategist at Rabobank. “U.S. real rates are the most important driver of pretty much every asset class at the moment, and EM is no exception.” Hawkish comments from several Fed policymakers as well as recent data signaling strength in the U.S. economy have doused hopes of the Fed’s ending its rate-hiking cycle soon, driving gains in the dollar and pressuring risk-sensitive EM assets. On Tuesday, Chile’s peso slipped 0.6% against the greenback, extending losses from the previous session when it logged its steepest one-day percentage fall in over two weeks. Mexico’s peso was off 0.4%. Data showed retail sales in Latin America’s second largest economy rose 0.1% in December from November. The peso has risen over 5.6% so far in 2023 and has been among the best-performing currencies in Latin America, with analysts pointing to its close ties with the U.S. economy as the reason. As investors returned after a long weekend in the United States, markets in Brazil and Argentina remained closed for the second straight day on account of public holidays. The Peruvian sol rose 0.7% after the top prosecutor’s office said it has formalized an investigation into former President Pedro Castillo. The Colombian peso was down 0.9%. Elsewhere in emerging markets, Israel’s shekel slid 1.7% against the dollar to a nearly three-year low after the country pressed ahead with its judiciary overhaul plan. Broader EM currencies lost 0.4%. Key Latin American stock indexes and currencies at 1733 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 992.79 -1.24 MSCI LatAm 2247.30 -0.81 Mexico IPC 53061.66 -1.57 Chile IPSA 5260.39 -1.32 Colombia COLCAP 1204.22 -0.55 Currencies Latest Daily % change Mexico peso 18.4567 -0.47 Chile peso 801.6 -0.35 Colombia peso 4957.35 -0.88 Peru sol 3.8157 0.66 (Reporting by Amruta Khandekar and Bansari Mayur Kamdar in Bengaluru Editing by Mark Heinrich and Leslie Adler)