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Bank of Mexico seen holding key interest rate at 11%, poll

shows

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Brazil's inflation slows in mid-June despite food price

pressure

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Kenya president backs down on tax rises after deadly

protests

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Latam stocks, FX down around 1% each

(Updated at 03:38 p.m. ET/ 1938 GMT)

By Johann M Cherian and Shristi Achar A

June 26 (Reuters) - A gauge of Latin American currencies

dropped to a near eight-month low on Wednesday, dragged by

Brazil's real as investors assessed comments by President Luiz

Inacio Lula da Silva, and the Mexican peso that lost ground

ahead of its interest rate decision.

MSCI's index tracking currencies in resources-rich Latin

America dropped 1.2% to its lowest since early

November 2023, as the dollar strengthened.

Brazil's real dropped 1.1% on the day.

Lula pushed back against spending cuts in an interview with

local media outlet UOL, while adding that the current levels of

interest rates of 10.5% were high with inflation at 4%.

Traders have been on edge about central bank independence

after the regulator shifted to a more hawkish stance on interest

rates recently. The real and the benchmark share index

are among bottom performers in the region.

Still, Felipe Camargo, senior emerging markets economist at

Oxford Economics said: "We expect President Lula to limit

himself to a combative rhetoric, but not actively intervene or

make politically motivated central bank board appointments that

could undermine its credibility."

Separately, data showed consumer prices in the region's

largest economy rose less than expected by mid-June despite

pressure from food inflation.

Market participants also await a crucial U.S. inflation

report due on Friday for clues on the trajectory of the Federal

Reserve's monetary policy trajectory, potentially impacting the

greenback's strength.

Oil exporter Mexico's peso depreciated 1.2% as

investors prepared for a Banxico monetary policy decision on

Thursday, while also watching for executive appointments in

President-elect Claudia Sheinbaum's new government.

A Reuters poll showed the local central bank is expected to

hold its benchmark interest rate steady at 11%, as inflationary

pressures continue and the peso's depreciation following the

June 2 general elections.

"A 'hawkish' statement from Banxico should give further

impetus for the USD/MXN to decline to under 18 units per

dollar," strategists at Macquarie noted.

Fellow oil producer Colombia's peso and copper

producer Chile's peso shed 1.2% each.

On the equities front, an index tracking regional stocks

declined 1%.

Heavy-weight Brazil's Bovespa traded flat as yields

on local bonds climbed.

Mexico's main stock index inched 0.1% lower, while

Chilean equities gained around 2%.

Argentina's MerVal index edged 0.2% higher. Investor

attention was squarely on the vote on several bills in the

country's lower house due on Thursday, that could influence

president Javier Milei's plans for the embattled economy.

Elsewhere, Kenya's president withdrew planned tax rises,

bowing to pressure from protesters who had stormed parliament,

launched demonstrations across the country and threatened more

action this week. The local shilling however was flat.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1085.36 0

MSCI LatAm 2173.58 -1.04

Brazil Bovespa 122334.59 0

Mexico IPC 52511.94 -0.18

Chile IPSA 6542.65 2.04

Argentina MerVal 1573735.40 0.198

Colombia COLCAP 1373.89 0.43

Currencies Latest Daily %

change

Brazil real 5.5170 -1.15

Mexico peso 18.3223 -1.25

Chile peso 951.8 -1.25

Colombia peso 4139.51 -1.27

Peru sol 3.8182 -0.45

Argentina peso (interbank) 911.5000 -0.22