* Uncertainty over U.S. stimulus hits region's FX
* Brazil's real down 0.9 pct, Mexican peso loses 0.7 pct
* Chilean peso weakens 0.6 pct, intervention eyed
* Argentina's markets rally after Kirchner's death (Adds closing prices, comments)
By Samantha Pearson and Caroline Stauffer
SAO PAULO/MEXICO CITY, Oct 27 (Reuters) - Brazil and Chile's currencies sank to their weakest in more than a month on Wednesday on fears that U.S. stimulus measures may not boost the countries' debt markets as much as thought.
Argentina's credit markets rallied after news that former Argentine President Nestor Kirchner, the current president's husband and a contender to succeed her in next year's election, died from a heart attack. His unorthodox economic policies have long caused resentment among investors.
But most investors kept their eyes on events in the United States. The U.S. Federal Reserve is likely next week to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, the Wall Street Journal reported on Wednesday. That rattled some investors, who had envisioned a bigger and more immediate stimulus package.
Investors have been banking on those measures to keep U.S. yields low and bring a deluge of cash to Latin America's higher-yielding bonds.
Brazil is a prime target since its benchmark interest rate of 10.75 percent is one of the highest in the world.
The Brazilian real
"There is some uncertainty over the Fed's policy next week," said Carlos Gandolfo, a partner at Sao Paulo's Pioneer brokerage.
Traders were also concerned that fresh measures to curb a
recent rally in the real, which has hurt exporters and the
current account deficit, could be announced after Sunday's
presidential run-off election.
However, such measures are likely to have a "limited impact if they are not accompanied by policies that open the door to a solution to the fundamental problem caused by Brazil's high interest rates," analysts at IEDI, an industry-funded economic think tank in Sao Paulo, wrote in a note.
Meanwhile, the Mexican currency
The Chilean peso
While Mexico's finance minister said the country is not losing export competitiveness due to recent currency gains, the situation is very different in Chile. [ID:nN27223162]
A backlash from exporters has put intense pressure on the government to curb the Chilean peso's rally. Earlier this week, Chile announced plans to open capital accounts and relax limits on investments abroad to curb inflows. But traders are concerned that more aggressive measures are on their way. [ID:nN20242719]
KIRCHNER'S DEATH PROMPTS RALLY
Argentine markets were the exception on an otherwise downbeat day. The country's shares and bonds rose sharply after the death of Kirchner removed from the 2011 election campaign a contender seen as unfriendly to markets. [ID:nN27233091]
Investors immediately bid higher Argentine credit and equity-related assets following the news, but volumes were low due to a local holiday.
"The legacy of the Kirchner Administration clearly reflects market interventionism and antagonism with the private sector," said Siobhan Morden, head of Latin America strategy at RBS Securities in Stamford, Connecticut. (Additional reporting by Guillermo Parra Bernal in Sao Paulo; Editing by Dan Grebler)