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Brazil's c.bank chief says neutral rate rising in short

term

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Argentina economy minister forecasts May inflation below

5%

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Colombian equity market closed

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Latam FX down 1.3%, stocks off 1%

By Ankika Biswas

June 10 (Reuters) - Mexico's peso fell to a more than

one-year low versus the dollar on Monday, leading losses in

Latin American currencies as focus remains on the country's

political developments, while investors awaited the Federal

Reserve's interest rate decision this week.

The Mexican peso fell to a low of $18.65 per dollar

before paring some losses, having logged its steepest weekly

decline since March 2020.

The governing party's unexpected lopsided victory last week

had prompted investor concerns that it may use its mandate to

sweep aside some of the checks on presidential power.

In latest developments, the ruling Morena party and its

allies won a super-majority in the lower house of Congress but

fell short in the Senate. A two-thirds majority is needed in

both houses to change the constitution.

"In Mexico, markets extended pre-election losses as the

worst-case scenario of a Morena supermajority in the lower house

was confirmed," wrote Jon Harrison, managing director for EM

macro strategy at TS Lombard.

"Our post-election reports noted potential positives for

investors in Mexico amid a still uncertain outlook," he added.

The MSCI index tracking Latam currencies

dropped 1.3% to a more than seven-month low, also dragged by a

0.8% decline in the Brazilian real to its lowest since

early January 2023.

A Reuters poll showed Brazil's consumer price data for May

will likely show an acceleration in inflation.

Meanwhile its central bank chief said Brazil's neutral

interest rate is higher than most peers, emphasizing its fall

over time. However, "when we look at the short term, (it will

be) going a little bit higher again", he added.

Most Latam currencies traded lower after last week's strong

U.S. jobs data, with all eyes now on the U.S. interest rate

decision on Wednesday. A slate of inflation reports throughout

the week will further set the tone for the U.S. policy outlook.

"Beyond short-term uncertainty, we expect most Latam FX to

lose ground against the dollar over the coming year, as most

central banks in the region should continue to ease faster than

the Fed," said Tomas Marinozzi, senior economist for Numera's

Macro Research.

Chile's peso also weakened 0.3% against the dollar,

even though copper prices traded higher. The country's policy

decision is due on June 18.

Meanwhile, Argentina's economy minister expects May

inflation below 5%, slightly lower than estimates, and noted

that the government sees signs of recovery in several sectors.

Although inflation has decelerated in Argentina since the

December inauguration of ultra-liberal President Javier Milei,

his austerity measures have caused the economy to shrink and

forced more people into poverty.

The MSCI index for Latam stocks was also

down 1% to its lowest level since November. Colombian equities

were shut for trading due to a public holiday.

Key Latin American stock indexes and currencies:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1069.51 -0.34

MSCI LatAm 2210.01 -1.02

Brazil Bovespa 121058.98 0.24

Mexico IPC 53329.43 0.66

Chile IPSA 6641.22 0.04

Argentina MerVal 0.00 0

Colombia COLCAP 1411.99 0.1

Currencies Latest Daily %

change

Brazil real 5.3736 -0.92

Mexico peso 18.5170 -0.74

Chile peso 921.9 -0.31

Colombia peso 3934.6 0.04

Peru sol 3.7369 0.00

Argentina peso (interbank) 901.0000 -0.17

Argentina peso (parallel) 1245 0.40