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Brazil central bank cuts rate by 25-bps

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Banxico leaves interest rates unchanged amid stubborn

inflation

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Peru's monetary policy decision on tap

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EM share index down 0.4%, FX off 0.3%

(Updated at 1940 GMT)

By Shashwat Chauhan and Johann M Cherian

May 9 (Reuters) - Brazil's real lagged its Latin

American peers on Thursday, weakening after its central bank

trimmed interest rates, while Mexico's peso ticked higher after

the local central bank stayed put on monetary policy.

By 1940 GMT, MSCI's gauge for Latin American currencies

hit a one-week low, and was last down 0.3%

Brazil's real dropped 1% to 5.14 a dollar after

the central bank cut interest rates by 25 basis points, in a

split decision that saw appointees of the current government

advocating for a larger reduction, sparking concerns of a

forthcoming dovish monetary policy influenced by politics.

The yield curve on

interest rate futures steepened

, with longer-term futures jumping as much as 30 basis

points, while the main equities index Bovespa fell 0.9%.

Mexico's peso strengthened to 16.8 to the dollar

after Banxico left borrowing costs in the region's second-

largest economy unchanged at 11%.

Padhraic Garvey, regional head of research, Americas at

ING Financial Markets said Banxico, which historically has been

a more conservative institution than others in the region, is

likely to wait for signs the U.S. Federal Reserve is moving

closer to kicking off interest rate cuts before moving forward

with its own rate cutting cycle.

Earlier in the day, data from the oil producer showed

12-month inflation accelerated slightly more than expected in

April.

Mexico's peso is the only currency among regional peers

to have seen gains this year given high oil prices, positive

prospects from near-shoring initiatives taken by U.S. firms and

still attractive real interest rates.

Copper producer Peru's sol hit over a one-month

high, while peer Chile's peso rose 1.3% as prices of the

red metal ticked higher.

On tap later in the day, markets will parse an interest

rate decision by Peru's central bank, where analysts polled by

Reuters anticipate a 25 basis point rate reduction.

Colombia's peso was flat after data overnight showed

consumer prices in the country rose in line with market

expectations in April.

On the equities front, MSCI's index for Latin American

stocks eased to hit a one-week low, last down

0.4%.

Bourses in Mexico and Peru gained 1.3% and

0.9%, respectively, while Argentina's MerVal index

dropped 1.2%.

Among single stocks, Brazilian power giant Eletrobras

lost over 3% after reporting a 19% fall in first-

quarter net profit, while education company Cogna

dropped around 4.3% after reporting first-quarter results.

Falabella jumped 11.5% after the Chile-based

retailer said it expects the completion of the sale of its

department stores business in Peru to MallPlaza

by around July.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1065.05 -0.15

MSCI LatAm 2496.47 -0.31

Brazil Bovespa 128310.14 -0.9

Mexico IPC 57987.01 1.59

Chile IPSA 6641.65 -0.04

Argentina MerVal 1432197.19 -1.262

Colombia COLCAP 1387.72 0.26

Currencies Latest Daily %

change

Brazil real 5.1422 -1.00

Mexico peso 16.7950 0.60

Chile peso 925.3 1.22

Colombia peso 3894 0.06

Peru sol 3.6861 0.60

Argentina peso 882.0000 0.00

(interbank)

Argentina peso 1025 1.46

(parallel)