EMERGING MARKETS-LatAm FX slips ahead of US Fed verdict; Brazil on watch

By Sudeshna Ghoshal

Oct 28 (Reuters) - Most Latin American currencies slipped on Wednesday ahead of the US Federal Reserve's interest rate decision, while Brazil's markets remained in focus as traders awaited President Luiz Inacio Lula da Silva's choice for his cabinet.

The Brazilian real weakened 0.3% against the US dollar, after a bruising selloff on Monday, when it marked its biggest one-day fall since 1999. It recouped some ground on Tuesday.

Brazil's benchmark index .BVSP was down 2.8%. Santander Brasil SANB3.SA declined 4.2% after a 15% drop in net profit in its Brazil market. Banco Bradesco and Itau Unibanco lost 7% and 3.1% respectively.

MSCI's index tracking regional currencies .MILA00000CUS was down 0.4%, while the stocks equivalent .MILA00000PUS was down 2.3%.

President Luiz Inacio Lula da Silva's surprise reelection to a historic fourth term jolted markets that were pricing in a victory for right-wing Senator Flavio Bolsonaro, hoping for consolidation of public finances.

Lula is under pressure to pick a finance minister who can send a signal of fiscal discipline and reassure markets, with sources pointing to Vice President Geraldo Alckmin and Rafael Fonteles, the reelected governor of Piauí state.

ISRAEL ELECTION

On the election front, Israel also remained in focus. Its shekel weakened 2.3% after Prime Minister Benjamin Netanyahu won the support of an unexpectedly clear majority of Israeli Jews, apparently ensuring he will survive as prime minister at least in a caretaker role.

Local shares .TA125 were down 2.3%.

"Israel is set for another round of protracted negotiations or a number of elections to break the deadlock," said Hasnain Malik, managing director, geopolitical risk and emerging markets equity strategy at Tellimer Research.

"The economic impact is likely minimal but the danger is increasing fissures in society, demonstrated by higher than expected votes for Likud, on the one hand, and the Arab parties, on the other."

FED IN FOCUS

On Wednesday, the US Federal Reserve's monetary policy decision will be in the spotlight, with the bank expected to hold interest rates steady ahead of the November 3 midterm election.

Comments from Fed Chair Kevin Warsh will be scrutinized for clues on the monetary policy path going forward, and could set the tone for global markets for the week.

Back in Latin America, the Colombian peso was down 0.2% ahead of Friday's local central bank decision, where it is widely expected to raise interest rates by 25 basis points to 12.50%.

Currencies in Mexico and Peru lost 0.1% and 0.2% respectively.

On the equity front, Mexican equities .MXX lost 1.1%, largely pulled down by a 2.8% drop in Wal-Mart de México WALMEX.MX, Walmart's Mexican arm, after the retailer missed third-quarter profit estimates.

In Chile, the peso appreciated 0.4%, while stocks .MMXIPSAGC slipped 1.3% after the central bank held its benchmark interest rate at 4.5% on Tuesday, in line with analysts' expectations.

Earlier this month, Chile cut its economic growth forecast for the year while slightly raising its inflation outlook.

Key Latin American stock indexes and currencies at 1501 GMT: