By Carla Mozee

Most major Latin American equity markets fell Wednesday as investors prepared for possible comments by U.S. monetary policy makers about the future direction of interest rates and their view about the state of the economy.

"Market attention is firmly fixed on today's FOMC meeting, with equities and [foreign exchange] trading in confined ranges," said analysts at RBC Capital Markets in a note to clients Wednesday.

The Federal Open Market Committee, in concluding a two-day meeting, is expected by analysts to leave its interest-rate target near zero, but investors will watch to see how far policymakers believe the world's largest economy is on the road to recovery.

Brazil's Bovespa fell 0.5% to 61,156, moving toward its first loss in four sessions. The index on Tuesday finished at its best level in more than 14 months following a decision by Moody's Investors Service to lift Brazil's debt rating to investment grade.

Communication and retail stocks weighed in Brazil, with shares of wireless services provider Tim Participacoes (TSU) down 2.7%, and department-stores operator Lojas Renner off by 2.4%.

Mexico's IPC fell 0.7% to 29,303 and was cruising toward its fourth consecutive loss. Shares of market heavyweight America Movil (AMX) fell 1.2% and Wal-Mart de Mexico (WMMVY) fell 1.7%.

RBC Capital said Standard & Poor's lead analyst covering Mexico "struck a negative-leaning tone late Tuesday, suggesting that President Calderon is likely to have difficulty persuading the opposition-PRI to support his fiscal and economic proposals."

S&P analyst Lisa Schineller was quoted as saying in an interview with Bloomberg News that administrations nearing the end of their terms "lose momentum."

Argentina's Merval on Wednesday fell 0.4% to 2,039.

But Chile's IPSA outperformed, rising 1%, with shares of Empresas CMPC up nearly 10%. The pulp and paper producer signed a memorandum of agreement to purchase a unit of Brazil's Aracruz for about $1.43 billion. In São Paulo, shares of Aracruz (ARA) rose 2.5%.

Making the grade

Brazil's currency continued to strengthen on Wednesday, trading at 1.784 reals per U.S. dollar from Tuesday's yearly high at 1.798 reals per dollar after Moody's upgrade of its ratings on Brazil's foreign- and local-currency government bonds to Baa3, or the agency's lowest level of investment grade. Moody's also said its outlook is positive.

Improvement in the government-debt structure was "an important contributing factor" to the upgrade, said Mauro Leos, Moody's regional credit officer for Latin America, in a statement.

Brazil's currency is up nearly 30% on a year-to-date basis, reflecting fundamental developments, noted Brown Brothers Harriman senior currency analyst Win Thin in a note to clients Wednesday.

The country is also likely to be upgraded again next year, wrote Thin.

"While the move brings Moody's into line with S&P's and Fitch's BBB- rating, the upgrade will open up an investor class that is prohibited from investing in split-rated investment grade countries," he said.

Along with Brazil, Chile and Mexico are the only countries in Latin America to have unified investment grades from the three ratings agencies, said Thin.

In ETF action, the iShares MSCI Brazil Index (EWZ) slipped less than 1%.