* Mexican central bank trims growth forecast to 1.1% from

1.6%

* US-Mexico launch USMCA negotiations, US demands new

origin rules

* Brazil's David strikes hawkish tone, raises doubts over

easing

* MSCI LatAm FX up 0.6%, stocks down 0.7%

(Updates with afternoon levels)

By Avinash P and Purvi Agarwal

May 28 (Reuters) - Most Latin American currencies pared

earlier losses on Thursday as investors weighed reports of a

potential breakthrough in U.S.-Iran talks aimed at ending the

war, while regional stocks were mixed as domestic developments

kept markets uneven.

Axios first reported that the U.S. and Iran were considering

a 60-day truce, during which negotiations over Tehran's nuclear

program would take place.

The proposal still requires approval from U.S. President

Donald Trump, the report said. The development came a day after

the two sides traded airstrikes.

Oil prices turned negative after the report, while the

dollar index slipped 0.3%.

"The bullish sentiment in LatAm has been there for some time

now because of their heavy commodity exposure and metal mining

leverage... much of it has already been priced in," said Lale

Akoner, global market strategist at eToro.

"So, we don't see much upside momentum on the effects based

on recent news about the U.S. and Iran possibly moving towards

an agreement ... it is very volatile and changes on a day-to-day

basis."

Mexico's peso appreciated 0.3%, while local stocks

were down 1.6%.

Mexico and the United States began formal talks on the

USMCA, the existing North American free-trade agreement, with

Washington seeking a new standard to measure origin content for

vehicles made in Mexico.

The Bank of Mexico lowered its 2026 economic growth forecast

to 1.1% from 1.6%, warning that uncertainty tied to the

negotiations could weigh on investment in the second half of the

year.

Brazil's real rose 0.6%, while the Bovespa

was down 0.3%. The country's central bank will not allow higher

inflation expectations to feed into actual inflation, monetary

policy director Nilton David said, striking a hawkish tone.

Brazil's central government, meanwhile, posted a

larger-than-expected primary surplus for April, Treasury data

showed, as stronger revenue outweighed higher social security

spending.

Colombia's peso weakened 0.2%, while the country's

COLCAP stock index also lost 0.3%.

Investors are awaiting the first round of Colombia's

presidential election, scheduled for the weekend, with polls

pointing to a tight race between leftist Ivan Cepeda and

right-wing candidate Abelardo De La Espriella.

Cepeda has pledged to deepen the economic and social reforms

of current President Gustavo Petro, while De La Espriella has

proposed incentives for private investors and measures to boost

the mining and energy sectors. Analysts expect more pro-growth

policies if the right-wing candidate wins.

Chile's equities gained 0.5%, partly tracking

higher copper prices, while the peso appreciated 0.6%.

MSCI's index of Latin American currencies

reversed earlier losses to trade 0.6% higher, while the regional

stocks gauge was flat.

Markets also digested U.S. data showing inflation increased

in April at its fastest pace in three years. Still, the figures

did little to alter expectations that the Federal Reserve will

ease monetary policy later this year.

"The U.S. data suggest the Fed is unlikely to make policy

more restrictive anytime soon, and that should ease pressure on

Latin American markets," said Andres Abadia, chief LatAm

economist at Pantheon Macroeconomics.

Key Latin American stock indexes and currencies:

Stock indexes

Latest Daily % change

MSCI Emerging Markets 1727.8 -0.65

MSCI LatAm 3061.74 -0.07

Brazil Bovespa 175276.89 -0.27

Mexico IPC 68895.21 -1.61

Chile IPSA 10889.35 0.46

Argentina MerVal 3077391.89 0.18

Colombia COLCAP 2187.2 -0.34

Currencies Latest Daily % change

Brazil real 5.0282 0.6

Mexico peso 17.3071 0.27

Chile peso 888.63 0.56

Colombia peso 3633.5 -0.19

Peru sol 3.407 -0.07

Argentina peso 1,409.0 0.25

(interbank)

Argentina peso 1,410.0 2.08

(parallel)