*

Brazil's economic activity falls less than expected in

July

*

Peru CB cuts benchmark rate for second time in a row to

5.25%

*

Goldman Sachs raises 12-mth target for MSCI EM stocks

index

*

Russia's central bank raises key interest rate by 100 bps

to 19%

*

Stocks rise 2.2%, FX adds 1.9%

(Updated 1945 GMT)

By Johann M Cherian and Shubham Batra

Sept 13 (Reuters) - Latin American currencies were set

for their best day in 20 months on a softer dollar on Friday, as

investors priced in the possibility of a bigger interest rate

cut by the U.S. Federal Reserve, alongside a rate hike by the

Brazilian central bank.

MSCI's index tracking regional currencies

rose 1.9% to scale a two-week high as the dollar slipped.

Markets focused on comments from a former U.S policymaker

who argued that a 50-basis point rate cut is still an option

next week. Worries about a global growth slowdown had weighed on

currencies of the commodity exporters in the region recently.

On expectations that the Fed's monetary easing cycle could

broaden out rate cuts by central banks in developing markets,

Goldman Sachs raised its 12-month target on the MSCI EM equities

index to 1175 - around 8.5% above current levels.

Brazil's real strengthened 1.2% after data showed

economic activity in the region's largest economy slowed less

than expected in July, reinforcing expectations that its central

bank will err on the side of caution on monetary policy next

week.

Bank of America analysts expect Brazil's benchmark rate to

rise from 10.50% currently to a peak of 12% in January 2025.

Copper producer Chile's peso rose 0.7%, with prices

of the metal hovering near a two-week high.

Peru's sol was up 0.5%, after its central bank

trimmed the benchmark interest rate as expected by 25 basis

points to 5.25%.

The sol has outperformed Latin American currencies and is

down 1.7% year-to-date.

"Peru's positive real policy rate and a current account

surplus on top of net FDI inflows should continue to support

(the sol's) regional outperformance," said Elias Haddad, senior

markets strategist at Brown Brothers Harriman.

Oil exporter Mexico's peso strengthened 1.8%, to

touch more than a two-week high, while Colombia's peso

advanced 0.3% and hit a one-week high, as prices of crude oil

rose.

Traders kept a close eye on political developments in Mexico

after lawmakers approved judicial reforms earlier in the week -

the run up to which saw the peso hit its lowest levels in nearly

two years.

On the equities front, the index tracking Latam bourses

jumped 2.2% to log its best day in five weeks.

Heavyweight Brazil's Bovespa rose 0.8%, underpinned by

oil giant Petrobras.

Mexican stocks climbed 0.2% and Peru's benchmark

index added 1.6%, while Colombia stocks

edged 0.2% lower.

Elsewhere, Russia's rouble weakened 2%. The central

bank unexpectedly raised its benchmark interest rate by 100

basis points to 19%, saying that inflation remained stubbornly

high and a tightening was needed to reduce it.

Key Latin American stock indexes and currencies

Stock indexes Latest Daily % YTD %

change change

MSCI Emerging Markets 1082.60 0.65 4.97

MSCI LatAm 2249.53 2.21 -17.35

Brazil Bovespa 135043.54 0.76 0.64

Mexico IPC 52059.16 0.11 -9.28

Chile IPSA 6351.62 0.13 2.48

Argentina MerVal 1811744.3 1.211 94.87

6

Colombia COLCAP 1318.28 -0.15 10.30

Currencies Latest Daily % YTD %

change change

Brazil real 5.5630 0.97 -40.44

Mexico peso 19.2077 1.57 2.56

Chile peso 925.4 0.66 -33.58

Colombia peso 4186.21 0.32 -28.77

Peru sol 3.77 -0.29 -14.14

Argentina peso 959.0000 0.16 -98.06

(interbank)

Argentina peso 1245 2.81 -98.46

(parallel)