* Brazil central bank cuts rates for a third straight

meeting to 14.25%

* MSCI LatAm FX fall 1.7%, stocks off 1.5%

(Updates with afternoon trading levels)

By Ragini Mathur, Avinash P and Shashwat Chauhan

June 18 (Reuters) - Most Latin American currencies weakened

against a firmer dollar on Thursday, as investors weighed the

growing chances of a U.S. Federal Reserve interest rate hike

later this year, offsetting optimism over the reopening of the

Strait of Hormuz.

Brazil's real dropped 1.2%, also pressured by the

central bank'sthird straight rate cut to 14.25%, whileleaving

its next steps open despite acknowledging a tougher inflation

outlook and risks from election-year fiscal stimulus.

Traders now expect Wednesday's cut to be the Brazilian

central bank's last this year, according to LSEG data.

The decision came as economists pared back expectations for

rate cuts by major global central banks following an oil-price

shock tied to the Middle East conflict.

Inflation expectations for Brazil have climbed steadily,

including over longer horizons, as President Luiz Inacio Lula da

Silva expands household support measures ahead of his October

re-election bid.

The Mexican peso lost 0.4%, with MSCI's broader gauge

of Latin American currencies down 1.7%. The

dollar index, meanwhile, gained 0.5%.

On Wednesday, the Federal Reserve held its main lending rate

steady, with policymakers' projections showing a rate hike in

2026.

"We think that the bar for further dollar gains from here is

quite high. The imminent signing of the Iran framework peace

deal means that oil prices could continue to ease, which should

alleviate pressure on U.S. inflation and may preclude hikes in

the second half of the year," said Matthew Ryan, head of market

strategy at Ebury.

Traders now see more than 70% chance of a Fed rate hike as

soon as September, according to the CME FedWatch Tool.

Colombia's peso was an outlier, climbing 0.5% against

the dollar ahead of Sunday's presidential vote where right-wing

candidate Abelardo De La Espriella would be squaring up against

Senator Ivan Cepeda.

Among stocks, MSCI's index for the region

shed 1.5%, while local bourses were trading in a mixed band.

In Brazil, petrochemical firm Braskem dropped

9.5% amid news reports on its debt negotiations with creditors.

Meanwhile, U.S. President Donald Trump said on Wednesday

that the U.S. would be better off without the U.S.-Mexico-Canada

Agreement, and that he would prefer not to have a new pact,

though he remained open to one.

The six-year-old USMCA and its predecessor have underpinned

a deeply integrated North American economy. But as negotiations

are expected to advance in the coming months, Mexican assets

could face renewed volatility.

Key Latin American stock indexes and currencies:

Equities Latest Daily %

change

MSCI Emerging Markets 1784.76 0.12

MSCI LatAm 2962.53 -1.53

Brazil Bovespa 168210.97 -0.14

Mexico IPC 68237.56 -0.1

Chile IPSA 10837.87 0.3

Argentina Merval 3336288.71 1.3

Colombia COLCAP 2405.71 1.21

Currencies Latest Daily %

change

Brazil real 5.172 -1.19

Mexico peso 17.363 -0.41

Chile peso 900.22 -1.17

Colombia peso 3432.5 0.48

Peru sol 3.3812 -0.15

Argentina peso (interbank) 1450.5 -0.59

Argentina peso (parallel) 1465 0.68