By Sruthi Shankar

May 31 (Reuters) - The Mexican peso slipped on Friday as

nerves ahead of Sunday's presidential election offset relief

from a U.S. inflation reading that supported expectations of

interest rate cuts from the Federal Reserve.

The peso edged down 0.2% to 17.05 per dollar, on

track for a weekly decline.

The Brazilian real fell 0.7% after a local holiday on

Thursday, trading near its weakest level in four weeks against

the dollar.

Other Latin American currencies held steady as the dollar

weakened after data showed U.S. inflation rose in line with

market expectations in April. The futures market continued to

price in one U.S. rate cut of 25 basis points this year

following the data.

The focus shifted to Mexico, where presidential frontrunner

Claudia Sheinbaum is almost universally expected to win on

Sunday, but some traders say prospects of a ruling party

congressional supermajority could be pressuring the peso.

A two-thirds majority would allow them to push through

constitutional reforms pitched by President Andres Manuel Lopez

Obrador, including energy sector reforms that are unpopular with

markets.

"The outcome will matter not to just Mexico but the rest of

the region as well. Many investors see in the region a trend

from left to right policies, given the Bolivia and Argentina

votes," analysts at BNY Mellon noted.

"In the bigger picture, Latam appears to have lost out to

Europe as a go-to destination for flows. But we think markets

could shift back to owning more in the region should politics

improve, headlines turn positive, and commodity prices stabilize

or move higher."

Mexico's IPC index fell 0.6%, while other stock

markets in the region were also mostly lower.

HIGHLIGHTS

** Brazil is not planning to change inflation target, Haddad

says

** Chile's Codelco, SQM finalize key lithium deal

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1048.39 -0.92

MSCI LatAm 2336.70 -0.94

Brazil Bovespa 122125.13 -0.47

Mexico IPC 55032.14 -0.58

Chile IPSA 6643.89 0.04

Argentina MerVal 1623040.41 -1.215

Colombia COLCAP 1404.20 0.03

Currencies Latest Daily %

change

Brazil real 5.2443 -0.70

Mexico peso 17.0498 -0.19

Chile peso 916.7 0.05

Colombia peso 3867.13 -0.12

Peru sol 3.7401 -0.10

Argentina peso (interbank) 895.0000 0.00