(Pricing update, adds analyst commentary) By Sruthi Shankar Jan 18. (Reuters) – Most Latin American currencies reversed course to fall against the dollar on Wednesday after aggressive remarks from Federal Reserve officials fueled concerns that US interest rates will continue to rise despite signs of slowing economic growth. The Brazilian real fell 1.1% to 5.16 per dollar, after reaching a two-month high of 5.06 earlier in the session. The Chilean peso and the Mexican peso lost about 1% each. Emerging market currencies had previously strengthened as the dollar took a hit after data showed US producer prices and retail sales fell more than expected in December, raising hopes that the Fed won’t be as aggressive as monetary policy this year. will tighten. The gains proved to be short-lived, as James Bullard, president of the St. Louis Fed, and Loretta Mester, president of the Cleveland Fed, emphasized the need to raise interest rates more than 5% to reverse inflation. insist. “We continue to believe that the markets are underestimating the Fed,” said Win Thin, global head of currency strategy at Brown Brothers Harriman. “As inflationary pressures continue to ease, we note that the core PCE remains well above the Fed’s 2% target and that more work is clearly needed to bring it lower.” The Mexican peso fell to 18.8 per dollar after previously hitting a nearly three-year high of 18.57. The currency was among the best EM performers of 2022, along with the Brazilian real. “We believe the MXN will remain strong in 1H23,” strategists from Grupo Financiero Banorte told clients as they forecast year-end levels for the peso at 20.20 per dollar. “By the second half of the year, however, we expect increased currency pressures given our view that Banxico will begin its easing cycle ahead of the Fed.” The real had a volatile start to 2023 on concerns about fiscal spending under the new government. Brazilian President Luiz Inacio Lula da Silva said the country’s minimum wage should rise in line with economic growth after the government announced a 7.43% year-on-year increase in monthly wages to 1,302 reais ($253.59). ) approved. However, Brazil’s Bovespa added 1.3%, with state-owned miner Vale one of the biggest gains as iron ore prices rose. Shares of retailer Americanas SA, hammered by reports of an accounting scandal, fell 6.3% to a new all-time low. Brazil’s BTG Pactual has obtained a court order nullifying some of Americanas’ protections against creditors, according to court documents reviewed by Reuters. Meanwhile, Argentina will buy back foreign bonds worth more than $1 billion to improve the South American country’s debt profile, said economy minister Sergio Massa, who wants to send a positive signal to markets despite low reserves. Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1028.66 0.12 MSCI LatAm 2283.80 -0.08 Brazil Bovespa 112656.78 1.09 Mexico IPC 53231.99 0.19 Chile IPSA 5230.46 1.05 Argentina MerVal 238094.27 -8.689 Colombia COLCAP 1337.08 0.24 Currencies Latest Daily % change Brazil real 5.1628 -1.14 Mexican peso 18.8439 -1.03 Chilean peso 822.9 -1.03 Colombian peso 4689.45 0.76 Peru sol 3.825 -0.24 Argentine peso (interbank) 182.8000 -0.16 ( reporting by Sruthi Shankar in Bengaluru; editing by Vin Shahrestani)