*

Mexican peso bounces off seven-week lows

*

Dollar rises after U.S. services sector data

(Updated at 3:31 p.m. EDT/ 1931 GMT)

By Sruthi Shankar

June 5 (Reuters) - The Mexican peso rebounded on

Wednesday from seven-week lows against the dollar a day earlier

as investors weighed the political path for Latin America's

second-biggest economy after the ruling coalition won a

landslide election victory on Sunday.

The peso strengthened by 1.6% to 17.57 per dollar,

after shedding about 5% in the past two days when traders

fretted about the ramifications of the election, which will see

Claudia Sheinbaum become president and her Morena party and its

allies poised for a super-majority in Congress.

Investors worry that the government could usher in

constitutional change and diminish checks and balances.

Morena and its allies will likely have 83 senators in the

next Congress, just shy of the two-thirds majority needed in the

chamber to change the constitution, the country's interior

minister said.

While the peso appeared to stabilize on Wednesday, other

Latin American currencies such as the Brazilian real,

Colombian peso and Chilean peso struggled to

make headway as the dollar firmed against its major peers.

The U.S. services sector snapped back into growth mode in

May after a short-lived contraction in the prior month,

according to a survey that may buttress the Federal Reserve's

wariness of a shift to interest rate cuts.

"We find that the market has struggled to price faster

cutting cycles in EM (emerging markets) unless the market

expectation of the first rate cut by the Fed is within striking

distance (less than three months away)," noted Tadas Gedminas,

an economist at Goldman Sachs.

"In the event that we get pre-election Fed cuts, we would

highlight local rates in Czechia, Hungary and Mexico as

potential candidates to benefit the most from this, although in

the case of Mexico this would also depend on how the

post-election dust settles."

A Reuters poll found that EM currencies will struggle to

rebound this year, pressured by a Fed that is in no rush to cut

rates and some pivotal national election results.

The poll also showed the 12-month consensus forecast for the

Brazilian real was downgraded to the weakest in one year,

suggesting its recent decline may become a longer-term issue,

rather than a passing trend.

Amid risk-on moves in global stock markets, a gauge of Latin

American equities climbed 0.6% after a six-day

run of losses that had pushed it to a seven-month low.

HIGHLIGHTS:

** Winter deepens misery for Argentina's poor following

Milei's financial cuts

** BHP and union to begin talks to avert strike at Chilean

copper mine

**

Brazil's industrial output

falls more than expected in April

Key Latin American stock indexes and currencies:

Latest Daily % change

MSCI Emerging Markets 1063.48 1.1

MSCI LatAm 2286.85 0.55

Brazil Bovespa 121320.15 -0.4

Mexico IPC 54321.01 1.56

Chile IPSA 6650.85 0.8

Argentina MerVal 1575707.34 -0.345

Colombia COLCAP 1405.52 0.11

Currencies Latest Daily % change

Brazil real 5.2969 -0.23

Mexico peso 17.5774 1.57

Chile peso 908.8 -0.41

Colombia peso 3932 -0.01

Peru sol 3.7366 -0.45

Argentina peso 898.0000 -0.06

(interbank)

Argentina peso 1230 2.85

(parallel)