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Dollar weakness helps EM FX

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Brazil inflation rises less than expected

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Argentina's Milei swaps cabinet chief

By Sruthi Shankar

May 28 (Reuters) - Most Latin American currencies gained

ground versus the dollar on Tuesday as investors looked ahead to

U.S. inflation data that could move the needle on expectations

of when the Federal Reserve will start cutting interest rates.

With the dollar staying defensive, the Brazilian real

, the Colombian peso and the Chilean peso

rose in the range of 0.4% and 0.5%.

The U.S. core personal consumption expenditures (PCE) index

- the Fed's preferred measure of inflation - will be released on

Friday, and expectations are for it to hold steady on a monthly

basis.

Traders see at least one U.S. rate cut by the end of this

year, as per LSEG's rate probabilities app, and a soft inflation

reading later this week could boost the case for further

monetary easing this year.

The weakness in the dollar sent a gauge of Latin American

currencies up 0.2% on Tuesday and put it on

track for monthly gains.

The real's gains came even as data showed consumer prices in

Brazil rose less than expected in the month to mid-May, with

12-month inflation remaining within the central bank's target

range.

"The decline in Brazilian inflation ... coupled with signs

of easing price pressures in some core categories will provide

relief to policymakers at the central bank," William Jackson,

chief EM economist at Capital Economics, noted.

"The next meeting in June will be a close call. But on

balance, these inflation figures suggest to us that Copom is

more likely to opt for a 25bp cut in the Selic rate than keep

rates unchanged."

The central bank cut interest rates by 25 basis points to

10.5% earlier this month following six consecutive reductions

twice that size.

Brazil's Bovespa rose 0.2%, with shares of

state-owned oil company Petrobras in the lead.

Petrobras' new chief executive said in her first public

comments since taking the helm on Friday that a basin in

Brazil's Equatorial Margin, an environmentally sensitive

offshore prospect seen as the country's most promising frontier

for oil exploration, was a matter of "national interest."

In Argentina, President Javier Milei accepted the

resignation of cabinet chief Nicolas Posse on Monday night, the

first cabinet shakeup of his five-month-old administration amid

strains over major economic reforms pitched by the government.

The cabinet shuffle comes at a delicate moment for Milei as

his signature reform bill is facing fresh obstacles in Congress

and a market rally for government bonds and the local currency

appears to be stalling.

HIGHLIGHTS:

** FACTBOX-As US moves towards faster stock settlement,

where are other countries?

** IMF says Brazil's flexibility on monetary easing pace is

prudent

** Codelco's head of unrefined copper to join Swiss trader

IXM

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1088.33 -0.18

MSCI LatAm 2417.68 0.36

Brazil Bovespa 124676.92 0.15

Mexico IPC 55096.54 -0.64

Chile IPSA 6823.47 0.18

Argentina MerVal 1557304.55 -0.965

Colombia COLCAP 1411.65 -0.15

Currencies Latest Daily %

change

Brazil real 5.1527 0.36

Mexico peso 16.6881 -0.26

Chile peso 897.3 0.43

Colombia peso 3850.75 0.47

Peru sol 3.7427 -0.23

Argentina peso (interbank) 893.0000 0.11