EMERGING MARKETS-Latam FX and stocks fall as dollar, U.S. yields weigh on risk assets

* Brazil inflation in line with forecasts in mid-Sept * Argentina’s economic activity declines for fourth straight month. * Latam FX down 0.5% * MSCI Latam stocks index at lowest since June (Updated at 3:50pm ET/1950 GMT) By Amruta Khandekar and Lisa Pauline Mattackal Sept 26 (Reuters) – Latin American currencies fell against a stronger dollar and MSCI’s index of stocks in the region dropped to a near four-month low on Tuesday, as investors soured on risk assets amid worries about the impact of higher-for-longer interest rates. MSCI’s index for Latin American currencies was down 0.5% as U.S. Treasury yields traded near 2007 highs and the dollar jumped back to levels last seen in November as markets readied for tighter than previously expected policy from the Federal Reserve . “The Fed’s dot plot and higher for longer narrative has really been expressed in U.S. yields,” Patrick Reid, co-founder of forex firm the Adamis Principle told the Reuters Global Markets Forum. Reid added that emerging market currencies would likely continue to trade within current ranges barring a move lower in the U.S. dollar and Treasury yields. The broader Latam stocks index dropped 1.7% to its lowest since June 1. The Mexican peso was the biggest decliner in the region, down 0.8% ahead of its central bank meeting where policymakers are expected to keep rates steady. Prospects of tighter monetary policy in the U.S. have pressured assets in resource-rich Latin America in recent days, with the possibility of weaker demand for metals from China given burgeoning trouble in the country’s property sector posing an additional risk. The Brazilian real was down 0.5%, giving up earlier gains after annual inflation data was in line with market expectations, while minutes from the central bank’s last rate-setting meeting also emphasized rate cuts were likely to continue at their current pace. “(Recent Brazil inflation data) looks consistent with (the central bank) being able to continue to cut rates while also not necessarily getting to a point where you think policy is stimulative,” said Kieran Curtis, head of emerging market local currency debt at Abrdn. The Colombian peso weakened 0.5%, Chile’s peso lost 0.1% and the Peruvian sol fell 0.3%. Chile’s central bank is expected to lower its benchmark interest rate by 75 basis points to 8.75% at its next monetary policy meeting in October, a poll of traders released by the bank showed on Tuesday. Argentinian stocks fell 0.7% after data showed the country’s economic activity declined for a fourth straight month. MSCI’s index of global emerging markets stocks was down 1.18%. Key Latin American stock indexes and currencies at 1950 GMT: Stock Indexes Latest Daily % change MSCI Emerging 946.12 -1.18 Markets MSCI LatAm 2268.86 -1.69 Brazil Bovespa 114281.6 -1.42 8 Mexico IPC 51167.35 -0.39 Chile IPSA 5762.58 -0.4 Argentina MerVal 544768.3 -0.688 5 Colombia COLCAP 1082.55 -1.62 Currencies Latest Daily % change Brazil real 4.9885 -0.45 Mexico peso 17.5304 -0.80 Chile peso 903.7 -0.10 Colombia peso 4071.5 -0.49 Peru sol 3.7736 -0.28 Argentina peso 350.0000 0.01 (interbank) Argentina peso 753 -1.06 (parallel) (Reporting by Amruta Khandekar and Lisa Mattackal in Bengaluru; Editing by Andrea Ricci and Marguerita Choy)