*

Brazilian real hits three-week low

*

Brazil's Azul slides on report co eyeing options to rework

debt

*

Peru finalizes 2025 budget proposal

*

Latam FX down 1.5%, stocks down 1.7%

(Updated at 1945 GMT)

By Shashwat Chauhan and Lisa Pauline Mattackal

Aug 29 (Reuters) - Most Latin American currencies and

stock markets slipped on Thursday, after better-than-expected

U.S. economic data reduced expectations for a 50-basis point

Federal Reserve interest rate cut and lifted the dollar.

The dollar index rose for a second straight session

after data showed the U.S. economy grew faster than initially

thought in the second quarter amid strong consumer spending.

MSCI's gauge of Latin American currencies

lost about 1.5%, while a gauge of stocks lost

1.7%. The currency index was set for its worst day since early

August.

Markets are all but convinced that the U.S. Federal Reserve

will ease monetary policy when it meets in September following

Chair Jerome Powell's dovish pivot last week, but weak economic

data earlier in the month saw investors pricing in a larger than

usual 50 basis point interest rate cut.

Traders trimmed those bets after the data, according to

CME's FedWatch, now seeing a 32% chance of a 50 bps cut versus

38% a day prior. Hopes for a September start to U.S. rate cuts

have helped boost emerging market assets this month after a

steep selloff.

Brazil's real and Mexico's peso led losses in the

region, falling about 1% each versus the dollar and both

touching roughly three-week lows.

Mexico's peso has dropped nearly 7% against the dollar

this month, as a stronger dollar, worries about domestic

judicial reforms and expectation of dovish central bank policy

saw investors grow less positive on the currency.

"Unhinged MXN dynamics may prompt the (Mexican central

bank) to adopt a more rate cutting defensive strategy, but we

also do not rule out an acceleration in the pace of cuts towards

the end of the year," analysts at Goldman Sachs wrote in a note.

Brazil's producer prices rose 1.6% in July, data showed,

while the IGP-M

Inflation index

slowed more than analysts expected in August.

On the equity front, Brazilian equities dipped

0.9%, while shares in Colombia shed 0.6%.

Shares of Brazilian airline Azul dropped more

than 30% following a media report that the company is

considering options to rework its debt.

On the other hand, Mexican stocks jumped 1.5%, led by

over 3% gains in Grupo Financiero Banorte and

Grupo Mexico.

Colombia's peso and Peru's sol both slipped

about 0.4%.

Chile's central bank is expected to lower its benchmark

interest rate to 5.50% at its next monetary policy meeting in

September, a poll of traders released by the bank showed.

The Peruvian government finalized its 2025

budget proposal

at $67.12 billion, up 4.5% from this year's budget and

paving the way for Congressional vote.

HIGHLIGHTS

** Chile unemployment rate hits 8.7% in quarter through July

** Ghana to launch debt exchange in coming days

** Russian central bank says new rate hike in September is

not a certainty

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1095.13 -0.19

MSCI LatAm 2242.02 -1.68

Brazil Bovespa 136061.37 -0.93

Mexico IPC 53220.88 1.49

Chile IPSA 6443.44 0.91

Argentina Merval 1658608.7 2.539

Colombia COLCAP 1334.51 -0.64

Brazil real 5.6237 -1.07

Mexico peso 19.8409 -1.02

Chile peso 911.83 0.08

Colombia peso 4117.5 -0.46

Peru sol 3.7401 -0.44

Argentina peso (interbank) 950 -0.105263

158

Argentina peso (parallel) 1295 3.0888030

89