Brazil stocks fell sharply and the currency eased on Wednesday as investors anxiously awaited a Central Bank decision on whether to cut interest rates for the eighth month running.
The Sao Paulo Stock Exchange's benchmark Bovespa index slumped 1.59 percent to 23,301.8 points, dragged down by profit-taking on the heels of a three-session run-up.
The Brazilian real, meanwhile, weakened 0.14 percent to 2.844 per dollar, slipping into the red after the Central Bank said it bought an unspecified amount of dollars at 2.841 reais per greenback. It was the tenth straight trading day that the bank intervened in the foreign exchange market.
The losses came while the Central Bank's Monetary Policy Committee, or Copom, mulled whether to cut its benchmark Selic rate to give Brazil's nascent economic recovery another push.
Fifteen of 20 economists polled by Reuters last week said the Copom would reduce its overnight lending rate by a half percentage point to 16 percent, its lowest level since April 2001. Of the remainder, four predicted a rate cut of 0.75 percentage points and one bet on a repeat of December's full-point cut.
The decision was expected shortly after the market closed.
"The market started speculating today that the rate cut could be smaller than initially expected, either 0.25 percentage point or nothing at all," said Luiz Roberto Monteiro, an investment advisor at Souza Barros brokerage in Sao Paulo.
Blue-chip shares, including state oil giant Petroleo Brasileiro and iron ore miner Companhia Vale do Rio Doce (CVRD), weighed on the broader market, falling 1.81 percent to 86.31 reais and 2.96 percent to 145.55 reais, respectively.
Banking shares also took a hit, with Banco Bradesco skidding 2.92 percent to 14.62 reais and Banco Itau notching a 1.58 percent drop to 280.00 reais.