EMERGING MARKETS-Latam FX slip on Fed rate concerns, Brazil’s real hits four-month low

* Brazil’s industrial output rises less than expected * Argentina’s bonds, peso hit ahead of elections * Colombia August exports fall * Latam FX down 1%, stocks down 1.6% By Amruta Khandekar and Johann M Cherian Oct 3 (Reuters) – Latin American currencies were dragged lower on Tuesday by worries about the U.S. interest rate path and lacklustre copper prices, with the Brazilian real dropping to an over four-month low after softer-than-expected industrial output data. MSCI’s index of Latin American currencies was down 1.0% by 1447 GMT, falling for the second day in a row. Latin American assets are at multi-month lows as investors flee risky assets in favour of the dollar and U.S. Treasury yields on expectations that the Federal Reserve would keep monetary policy restrictive for longer. Investors are also concerned that high U.S. borrowing costs could take the shine off yields on regional currencies with some Latin American economies having started a rate-cutting cycle. The Brazilian real hit its lowest level since late May and was last down 1.1% after data showed industrial production in Latin America’s largest economy rose 0.4% in August, slightly less than expectations of a 0.5% increase. Analysts had mixed views on the data. “The data, while it’s below expectations, still confirms that economic activity in Brazil is quite resilient … the selloff in the BRL is a continuation of the overall global macro environment where the dollar is strong and on the flip side of this, EM FX is weak,” said Olga Yangol, head of EM research & strategy at Credit Agricole. The reading suggests that the industrial sector was as a drag on growth in the third quarter, said William Jackson, chief emerging markets economist at Capital Economics, in a note. Brazil’s current pace of monetary policy easing is “appropriate” for the moment, central bank chief Roberto Campos Neto said, following two consecutive 50 basis point cuts in recent months. Major copper producer Chile’s peso fell 0.5% as prices of the red metal fell to four-month lows. However, Peruvian sol, the currency of another top copper exporter bucked the trend to rise 0.1% Currencies of top oil exporters Mexico and Colombia fell 0.6% and 0.3% respectively, with crude prices under pressure. Colombia reported exports worth $3.95 billion in August, down 10.1% year-on-year, the government’s DANE statistics agency said on Tuesday. Meanwhile, Argentinian markets have been bruised in recent days, with bonds sliding and the peso slumping to a record low of 800 per dollar in parallel trade on uncertainty ahead of the Oct. 22 vote which could usher in far-right libertarian Javier Milei as president. The peso was at 798 against the dollar on Tuesday. Latin American stocks fell 1.6%, with equities in Brazil, Mexico and Chile down between 0.5% and 0.7%. Key Latin American stock indexes and currencies at 1447 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 939.51 -1.26 MSCI LatAm 2222.45 -1.52 Brazil Bovespa 114410.61 -0.56 Mexico IPC 51012.97 -0.48 Chile IPSA 5715.77 -0.73 Argentina MerVal 554060.89 -0.497 Colombia COLCAP 1114.93 0.19 Currencies Latest Daily % change Brazil real 5.1185 -1.03 Mexico peso 17.7738 -0.62 Chile peso 912 -0.43 Colombia peso 4173.15 -0.33 Peru sol 3.7801 0.11 Argentina peso 350.0000 0.01 (interbank) Argentina peso 798 0.25 (parallel) (Reporting by Amruta Khandekar and Johann M Cherian in Bengaluru; Editing by Josie Kao)