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Brazil's central bank holds surprise swap auction

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Mexico's peso set for near 6% monthly drop

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Latam stocks up 0.2%, FX adds 0.3%

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Peru markets closed

(Updated at 1950 GMT)

By Shashwat Chauhan and Lisa Pauline Mattackal

Aug 30 (Reuters) - Most Latin American currencies

slipped on Friday, as the U.S. dollar firmed after data

supported the likelihood of smaller interest rate cuts by the

Federal Reserve.

The dollar index rose after data showed U.S. consumer

spending rose in July, while the personal consumption

expenditures (PCE) price index - the Fed's preferred inflation

gauge - rose 0.2% last month.

The data saw traders further trim bets on a larger 50 basis

point interest rate cut from the Fed next month, meaning

pressure on emerging markets from a stronger dollar and elevated

U.S. borrowing costs were likely to continue despite the Fed

still being expected to cut rates by 25 bps.

"(U.S.)consumer spending remains very robust and this may

make the Fed reluctant to move aggressively," analysts at ING

said in a note.

Most Latin American currencies slipped against the dollar,

with Brazil's real down 0.2%, Chile's peso

slipping 0.1% and Colombia's peso easing 1.6% to a nearly

four-week low.

The real pared some early losses after the central bank sold

$765 million in a surprise swap auction, after previously

selling the entire $1.5 billion it offered in a spot auction.

Mexico's peso, however, bucked the trend to rise

0.8%. Still, it was set for a close to 6% monthly drop - its

third monthly decline - as worries about domestic judicial

reforms and expectation of dovish central bank policy saw

investors grow less positive on the currency.

The peso's gains kept MSCI's index for Latin American

currencies supported, up 0.3%, while a gauge for

stocks rose 0.2%.

Amongst equities, Brazil's Bovespa dipped 0.4% and

Mexican stocks slipped 0.5%, though Colombia's Colcap

gained 2% and Argentina's Merval jumped 3.5%

to an over one-month high.

The currency index was set to lose 0.6% for the month. The

stocks index was on track to gain 1.6%, slightly outperforming

MSCI's gauge of global emerging market stocks' 1.3%

rise.

August closes a turbulent month for global risk assets,

which tumbled early in the month on worries about U.S. economic

growth and an unwinding of yen currency carry trades.

High-yielding Latin American currencies saw sharp declines,

but have since recovered some ground as positive U.S. data and

policymaker comments cemented expectations for the Fed's first

interest rate cut.

Still, most Latin American currencies were set for monthly

losses against the dollar. The greenback, however, weakened

about 3% against Chile's peso and 0.1% against the real on a

monthly basis.

Brazil's central bank chief Roberto Campos Neto said rate

adjustments would be "gradual."

Markets in Peru were shut for a public holiday.

HIGHLIGHTS

** Brazil's jobless rate drops to 6.8% in quarter through

July

** Chile's copper output, manufacturing production up in

July

** Kenya's inflation rises slightly to 4.4% yr/yr in August

** Maldives bonds at record low after Fitch downgrade amid

default concerns

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1099.51 0.42

MSCI LatAm 2240.71 0.16

Brazil Bovespa 135454.44 -0.43

Mexico IPC 52861.28 -0.52

Chile IPSA 6438.08 -0.16

Argentina Merval 1719464.9 3.573

3

Colombia COLCAP 1362.28 2.02

Currencies Latest Daily %

change

Brazil real 5.6356 -0.16

Mexico peso 19.6847 0.76

Chile peso 913.42 -0.12

Colombia peso 4178.5 -1.63

Peru sol 3.748 -0.21

Argentina peso (interbank) 950.5 0

Argentina peso (parallel) 1285 2.3346303

5