*

Foreigners pour $31 billion into EM portfolios in Aug, IIF

says

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Mexico's sweeping judicial overhaul formally takes effect

*

Peru economy expands for fourth straight month in July

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Milei pledges to protect fiscal balance in budget speech

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FX up 0.6%, stocks add 0.8%

By Ankika Biswas

Sept 16 (Reuters) - Most Latin American stocks and

currencies rose in early trading on Monday, as emerging market

assets rode the prospects of an outsized Federal Reserve

interest rate cut, while Israel's shekel and shares slid on talk

that Netanyahu may dismiss his defence minister.

The MSCI index for Latam currencies was at a

near one-month high, with the broader EM currencies gauge

scaling a lifetime high on the day. The regional

stocks index also climbed 0.8%.

Both Latam indexes logged weekly gains on Friday, due to

strong expectations of a September U.S. rate cut. With markets

gearing up for an all-but-certain Fed cut, the question remains

the size of such a move. LSEG data shows market bets are largely

inclined toward a 50-basis-point cut on Wednesday.

Lower U.S. rates could give EM central banks more room for

manoeuvre to ease themselves and support domestic growth,

barring the volatility and uncertainty around November's U.S.

presidential election. Latin American countries are some of the

major EMs that have already started a rate-cut cycle before the

Fed.

"Whether it will be a 25-bps or 50-bps cut in the Fed funds

rate, we really need to know more about where the rate will

settle in a year or so from now," said Steven Major, global head

of fixed income research at HSBC.

"By September 2025 the Fed funds futures imply almost 250

bps of rate cuts and the maximum for this cycle is just a tad

more, according to the January 2026 Fed funds futures."

Brazil's real was the top Latam currency gainer,

strengthening 1% against the dollar to a near three-week high,

with investors also awaiting the country's inflation figures due

on Tuesday.

On the flip side, the Mexican peso slipped 0.5%,

set to snap a three-day winning streak, after having touched its

highest level since Aug. 26 in early trade. The local equity

market was closed on account of Independence Day.

Mexico's judicial reform overhauling the country's courts,

which will allow voters to elect judges, officially took effect

on Sunday, marking a major legislative victory in President

Andres Manuel Lopez Obrador's final weeks in office.

Among other Latam currencies, Chile's peso rose

0.5% against the dollar, boosted by strong copper prices.

Colombian peso rose 0.2%, due to a jump of around 2% in

oil prices.

Peru's sol slipped 0.1%. Data showed Peru's economy

expanded for the fourth month in a row in July fueled by all

sectors except agriculture, continuing the country's recovery

following a recession last year.

In Argentina, President Javier Milei said during a

presentation to Congress on Sunday on the 2025 budget that he

would defend his government's commitment to maintaining fiscal

balance and veto all bills that threaten it.

Meanwhile, data from a banking trade group showed foreign

investors ploughed a net $30.9 billion into EM stocks and debt

portfolios in August.

Elsewhere, talk that Israeli Prime Minister Benjamin

Netanyahu was considering firing Defence Minister Yoav Gallant,

something denied by Netanyahu, sent Israeli financial markets

lower, dealers highlighted.

The shekel weakened nearly 1% against the dollar,

while the main stock index fell 1.5% to a near

one-month low.

Key Latin American stock indexes and currencies at 1400 GMT:

Equities Latest Daily % change

MSCI Emerging Markets 1087.13 0.45

MSCI LatAm 2265.8 0.76

Brazil Bovespa 135665.86 0.58

Mexico IPC 52016.85 0.03

Chile IPSA 6343.58 -0.12

Argentina Merval 1817734.05 0.0

Colombia COLCAP 1316.12 0.34

Currencies Latest Daily % change

Brazil real 5.508 1.01

Mexico peso 19.2768 -0.47

Chile peso 921.3 0.51

Colombia peso 4177.46 0.17

Peru sol 3.776 -0.11

Argentina peso (interbank) 961 -0.156087409

Argentina peso (parallel) 1245 2.81124498

(Reporting by Ankika Biswas in Bengaluru)