(Updated at 1448 GMT)

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Stocks down 2%, FX off 1.2%

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Mexico economy grows 0.2% in Q2; Aug CPI falls

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Brazil's Vibra to buy remaining stake in Comerc

By Shubham Batra

Aug 22 (Reuters) - Latin American currencies dropped

against the greenback on Thursday hurt by heavy losses in

Brazilian real and Mexican peso as the dollar gained ahead of

the all-important speech by Federal Reserve Chair Jerome Powell

on Friday.

MSCI's gauge of Latam currencies slipped

nearly 1% to hit a two-week low.

The Mexican peso extended its decline for a fifth

session, falling 0.8%, after a slew of economic data boosted

hopes of a rate cut by the country's central bank at the end of

September.

Consumer prices in Mexico eased in early August, while the

domestic economy grew 0.2% in the second quarter from the

previous three-month period, in line with market expectations.

"All told, the August mid-month CPI print, alongside the

weak activity data for June (which were also released today) and

the Fed's confirmation that it will kick off its loosening cycle

next month means that we expect Banxico to lower its policy rate

by another 25bp, to 10.50%, at its meeting on 26th September,"

said Kimberley Sperrfechter, emerging markets economist at

Capital Economics.

Brazil's real was the worst performing

currency on the day with an over 1.2% fall against the U.S.

dollar. Federal Reserve minutes on Wednesday signalled U.S.

interest rate cuts were set to begin in a few weeks' time.

Peruvian sol was an outlier among the regional

currencies that gained 0.2% as copper prices rose on falling

metal inventories, easing worries over a potential U.S. economic

recession and demand showing signs of improvement in China.

All eyes will be on Powell at 10 a.m. ET on Friday at the

Jackhole Hole economic symposium. His comments will provide

investors much-needed rate guidance to investors, who have fully

priced in a 25 basis point cut in September.

A gauge of Latin American stocks dropped

around 2% dragged down by deep selloff in Argentina's Merval

index, Chile's S&P IPSA index and Brazil's

Bovesopa.

All three indexes were down between 0.6% and 1.6%.

Argentina's economic activity fell 3.9% in June compared to

the same month last year, official data showed on Wednesday, as

the economy shrunk again during the month after a rare rise in

May.

Brazilian fuel distributor Vibra tumbled 3.6%

after it had signed an agreement to exercise its right to buy

the remaining stake in power generator and trader Comerc for

3.52 billion reais ($642 million).

Meanwhile, Brazil will tighten up rules to enter the country

without a visa starting next week, the government said on

Wednesday, after migrants have been increasingly using the South

American nation as a stop-over on the way to the United States

and Canada.

Key Latin American stock indexes and currencies at 1448 GMT:

Stock indexes Latest Daily YTD %

% change

change

MSCI Emerging 1100.25 -0.06 7.44

Markets

MSCI LatAm 2272.48 -1.87 -13.03

Brazil Bovespa 135539.6 -0.68 1.01

8

Mexico IPC 53939.54 0.14 -6.01

Chile IPSA 6451.42 -0.68 4.05

Argentina MerVal 1592084. -1.788 71.25

36

Colombia COLCAP 1344.66 -0.2 12.50

Currencies Latest Daily YTD %

% change

change

Brazil real 5.5551 -1.33 -40.36

Mexico peso 19.4139 -0.74 1.47

Chile peso 920.2 -0.51 -33.20

Colombia peso 4064.25 -0.93 -26.63

Peru sol 3.7593 -0.61 -13.89

Argentina peso 944.5000 0.00 -98.03

(interbank)

Argentina peso 1330 1.88 -98.55

(parallel)