EMERGING MARKETS-Brazil’s real drags Latam FX as wider rate cut spooks investors

* Brazil cuts rate by 50 bps * Colombia’s cuts 2023 forecasts for inflation, growth * Czech Republic keeps rates steady, ends FX interventions (Updated at 1929 GMT) By Ankika Biswas, Amruta Khandekar and Shristi Achar A Aug 3 (Reuters) – Latin American currencies hit a three-week low on Thursday, depressed by Brazil’s real as a bigger-than-expected local interest rate amplified worries about a hit to returns from easing monetary policy in the region. The MSCI index for Latam currencies dropped 1.3%, with the real shedding 1.7% and touching 4.887 per-dollar intraday, a three-week low. Brazil’s central bank kicked off its rate-easing cycle with a 50-basis-point cut, signaling more of the same going ahead due to an improving inflation outlook. The country’s interest rate futures also fell across the board. “The rate cut that we saw is slightly larger than priced in by markets, but real interest rates remain firmly positive and among the highest in the world,” said Matthew Ryan, head of market strategy at Ebury. “FX reserves are very large (and) elevated commodity prices should be should be bullish for the real, given Brazil’s dependence on commodities.” The Latam currencies index has been on the decline in recent days after hitting multi-year highs just last week as the start of rate cuts in the region and the Bank of Japan’s (BOJ) surprise policy tweak fanned concerns about carry trade becoming less attractive. Commerzbank’s FX analyst Esther Reichelt, however, believes a policy re-evaluation may be under way if the disinflationary process in Brazil isn’t as fast as expected. The Mexican peso fell for the fourth day and was already on track to shed over 3% this week, touching a near two-month low of 17.27 per dollar in the session. Colombia’s central bank on Wednesday lowered its 2023 inflation outlook to 9% from 9.5%, and cut its growth forecast to 0.9%. The peso was down 2.4%. Among other currencies, Chile’s peso and Peru’s sol also lost 0.2% and 1% respectively. Elsewhere, the crown was last down 0.9% at 24.20 to the euro after the Czech Republic’s central bank kept rates unchanged as expected and formally ended an exchange rate intervention regime to support the crown. Among stocks, Ambev lost 2.9% after the Brazilian brewer reported a 15.2% decline in second quarter net profit. Key Latin American stock indexes and currencies at 1929 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1015.43 -0.45 MSCI LatAm 2448.72 -1.39 Brazil Bovespa 120720.24 -0.11 Mexico IPC 53427.79 0.27 Chile IPSA 6282.80 -0.78 Argentina MerVal 443420.52 -0.406 Colombia COLCAP 1171.14 0.88 Currencies Latest Daily % change Brazil real 4.8873 -1.70 Mexico peso 17.2728 -1.53 Chile peso 850.8 -0.22 Colombia peso 4163.5 -2.43 Peru sol 3.6985 -1.03 Argentina peso 278.0500 -0.23 (interbank) Argentina peso 568 -1.41 (parallel) (Reporting by Ankika Biswas, Amruta Khandekar and Shristi Achar A in Bengaluru; editing by Jonathan Oatis and Cynthia Osterman)