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Brazil central bank will raise rates if needed- minutes

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Mexico inflation seen rising to highest in over a year in

July

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Mexico, Peru policy decision due on Thursday

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FX up 1.7%, stocks climb 3%

(Updated at 3:15 p.m. ET/ 1915 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

Aug 6 (Reuters) - Improved risk appetite helped the

Brazilian real and Chilean peso jump over 1% against the dollar

on Tuesday, with most Latin American assets recouping some lost

ground from the heavy selling in recent sessions.

The MSCI index for Latam currencies was up

1.7% following a two-day selloff, while the stocks gauge

climbed 3% after sliding over the past three

sessions.

Both the indexes touched over one-year lows on Monday, as

heightened fears over a likely U.S. recession strangled risk-on

sentiment and sparked a flight away from risk assets globally to

safe-haven ones such as the Japanese yen.

Disappointing tech earnings and geopolitical worries also

added to the deteriorating sentiment for emerging markets.

However, some calm returned to markets on Tuesday, with most

EM assets, including Latam, gaining as traders continued to

price in a hefty 50 basis-point interest rate cut from the

Federal Reserve by September. Lower U.S. interest rates

typically benefit EM stocks and currencies.

Brazil's real climbed 1.3%, coming off the over

three-year low hit on Monday, with the country's central bank

meeting minutes showing that it won't hesitate to raise interest

rates if needed to bring inflation down to its target.

"It may at some point require an upward recalibration of the

policy rate path if inflation expectations keep on drifting

upwards, the BRL remains under pressure, and the domestic real

business cycle remains resilient," Goldman Sachs analysts noted.

"The recent market gyrations and anticipation of a more

dovish Fed policy rate path may give the Copom a few welcome

extra degrees of freedom to properly evaluate the situation and

calibrate the policy path," they said using the shorthand for

Brazil's monetary policy committee.

Further, Brazil's former finance minister Guido Mantega

praised President Luiz Inacio Lula da Silva for moderating his

criticisms of the central bank's policies, while adding he

supports the potential nomination of Gabriel Galipolo to head

the monetary authority.

The Chilean peso also rose over 1%, as the top copper

producer's currency got a boost from a recovery in the red

metal's prices after hitting an over four-month low.

Equities in Chile and Brazil also climbed

in a broad-based rebound for Latam stocks, while Argentina's

benchmark index climbed 3% from Monday's three-month low

levels.

Meanwhile, the Mexican peso remained under pressure,

down 0.4%, after having hit a near two-year low in Monday's

intraday trading.

An interest rate decision out of Mexico is due on Thursday,

with a Reuters poll revealing the country's headline inflation

rate likely accelerated again in July to its highest level in

over a year, while the core index could continue to moderate.

Peru's monetary policy decision is also due on Thursday. The

sol was flat, with the equity market closed on account of

a public holiday.

A rebound in oil prices helped lift Colombia's peso

, up 0.4%.

Elsewhere, Kenya cut its benchmark rate by 25 basis points,

saying there was scope to ease policy gradually as inflation had

fallen below the midpoint of its target range.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1030.81 1.41

MSCI LatAm 2141.2 2.99

Brazil Bovespa 126851.49 1.22

Mexico IPC 52343.43 1.09

Chile IPSA 6171.75 1.19

Argentina Merval 1454530.0 2.394

4

Colombia COLCAP 1308.13 1.05

Brazil real 5.6504 1.28

Mexico peso 19.409 -0.4

Chile peso 943.25 1.14

Colombia peso 4138.19 0.35

Peru sol 3.7065 0.01

Argentina peso (interbank) 935 0

Argentina peso (parallel) 1355 2.58302583