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Chile's economic activity up 3.5% in April

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Peru inflation eases in May for second straight month

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Latam FX down 0.8%, stocks drop 1.8%

By Ankika Biswas

June 3 (Reuters) - The Mexican peso slid 3% against the

dollar on Monday, pushing the Latin American currencies index to

a more than one-month low, as traders feared that a

supermajority for the country's ruling party could trigger

constitutional changes.

Claudia Sheinbaum won a landslide victory and will become

Mexico's first female president as widely expected.

However, the huge gains for the ruling Morena party and its

allies surprised markets, raising worries this would allow the

group to pass controversial constitutional reforms such as in

the energy sector unchecked.

The peso dropped to a more than one-month low, last

trading at 17.55 to the dollar, and poised for its steepest

one-day drop in nearly four years.

"The extent of the MXN pullback is also due to limited

liquidity for an asset class where traders have significant net

long positions as a pure 'carry' play," said Joaquin Kritz Lara,

chief economist at Numera Analytics.

"While the MXN may remain under pressure near term, the

election results materially won't alter its risk-reward profile.

Mexico has a small current account deficit, near-balanced

primary fiscal budget, and reasonable FX reserve cover, and

benefits from steady foreign direct investment flows that is

unlike to fade under Sheinbaum."

The MSCI gauge for Latin American currencies

dropped 0.8%, set for its fourth straight session of declines.

The MSCI stocks index also shed 1.7%, led by a

1.8% decline in Mexican equities.

Meanwhile, Chile's central bank is expected to lower

interest rates by 25 basis points at its next monetary policy

meeting this month, the bank's poll of traders showed.

Further, the country's IMACEC economic activity index grew

3.5% in April from a year earlier, the central bank said,

landing below the 4.0% growth expected by economists polled by

Reuters.

Higher copper prices also aided a 0.5% rise in Chile's peso

, with the country being the largest producer of the red

metal.

On the flip side, Peru's currency, another top

copper producer, declined 0.3%. Data showed the country's

monthly inflation rate slowed for the second month in a row in

May to 0.09%, bringing annual inflation down to its lowest level

in three years.

Among others, the Brazilian real was up 0.3% against

the dollar.

A Reuters poll showed Brazil's economy is forecast to have

picked up pace in the first quarter of the year, driven by

higher federal outlays that added to stronger household spending

and private investment.

While stocks across major Latam nations traded broadly

lower, Colombian equities were shut for trading due to a

holiday.

Elsewhere, El Salvador's President Nayib Bukele took office

on Saturday for a second term, pledging to cure the country's

"illnesses" by prescribing his medicine to fix the economy.

Key Latin American stock indexes and currencies:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1070.00 2.01

MSCI LatAm 2295.83 -1.79

Brazil Bovespa 121709.47 -0.32

Mexico IPC 54201.11 -1.77

Chile IPSA 6636.22 0.05

Argentina MerVal 0.00 0

Colombia COLCAP 1399.94 -0.27

Currencies Latest Daily %

change

Brazil real 5.2321 0.33

Mexico peso 17.5150 -2.98

Chile peso 911.3 0.53

Colombia peso 3855.16 0.00

Peru sol 3.7217 -0.25

Argentina peso (interbank) 896.5000 -0.06

Argentina peso (parallel) 1205 2.07

(Reporting by Ankika Biswas in Bengaluru; Editing by Sriraj

Kalluvila)