Most Latin American currencies and stocks rose on Wednesday, with Colombia's peso looking to end its longest losing streak in more than 2-1/2 years, while the U.S. Federal Reserve's decision to hold interest rates kept the dollar subdued.
The U.S. dollar fell after the Federal Reserve said economic recovery remains on track despite a rise in coronavirus infections, in a new upbeat policy statement and flagged ongoing talks around the eventual withdrawal of monetary policy support.
"It was very much in line with expectations - no rate raise, no talk about talking about tapering," said Thomas Hayes, managing member at Great Hill Capital Llc in New York.
"The Fed holding rates should keep the dollar subdued, which is helpful for Latin American currencies."
Rising oil prices also helped currencies of crude exporters Mexico and Colombia rise 0.3% and 1.4% respectively against the dollar.
Colombia's peso lost 3.5% over the last eight sessions, weighed by anti-government protests, which started over discontent with a tax reform bill, and underlying economic weakness from the pandemic that cost Colombia two out of three of its investment-grade debt ratings.
On ratings, Moody's on Tuesday downgraded Mexico's Pemex deeper into junk territory, criticizing the heavily indebted fallen angel's plans to expand refining capacity.
Pemex's finances have weighed on Mexico's sovereign credit rating.
But Mexico's peso still presents value at current levels, and its carry trade appeal remains attractive thanks to a relatively hawkish market view on the central bank, TD strategists said.
Brazil's real was up 0.9%. Inflation pressures in Brazil surged to historic highs in June, data showed on Wednesday, strengthening expectations of interest rate hikes.
The key rate is expected to rise to 7.00% this year.
Political headwinds are gathering, however, as President Jair Bolsonaro's popularity slides ahead of an election next year.
Peruvian markets were closed for a holiday. Socialist Pedro Castillo is set to assume the presidency of a deeply divided nation at 1500 GMT on Wednesday. The make-up of his cabinet and his first address are awaited.
The sol has lost almost 8% so far this year, with almost all of it made after Castillo's surprise win in the first round vote in April. Copper producers of the world's second biggest producer of the metal are fearful of his plans to hike taxes on mining.
Among stocks, Mexican conglomerate Femsa and Brazilian motor maker WEG rallied after reporting strong quarterly results. MSCI's index of Latam stocks rose 1.3% to scale near two-week highs.