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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 2.7%

(Updated at 3:57 p.m. ET)

By Ankika Biswas and Shubham Batra

June 3 (Reuters) - The Mexican peso dropped nearly 4%

against the dollar on Monday, pushing the Latin American

currencies index to a six-week low, as traders feared that a

supermajority for the country's ruling party could trigger

constitutional changes.

Mexico's main stock index S&P/BMV IPC also dived 6.2%

to log its worst day in four years.

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 17.7205 to the dollar, and was 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."

The MSCI gauge for Latin American currencies

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

The MSCI stocks index also shed 2.7%, led by a

losses in in Mexican equities.

Meanwhile, the Chilean peso gained 1.5% against the

greenback as the country'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 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 0.1%. 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 0.2% 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.

Key Latin American stock indexes and currencies at 1557 ET:

Stock indexes Latest Daily % YTD %

change change

MSCI Emerging Markets 1070.15 2.02 2.37

MSCI LatAm 2274.37 -2.71 -12.21

Brazil Bovespa 122254.78 0.13 -8.89

Mexico IPC 51768.65 -6.18 -9.79

Chile IPSA 6605.97 -0.4 #VALUE!

Argentina MerVal 1660487.3 0.549 78.60

8

Colombia COLCAP 1399.94 -0.27 #VALUE!

Currencies Latest Daily % YTD %

change change

Brazil real 5.2354 0.29 -36.71

Mexico peso 17.7205 -4.11 11.17

Chile peso 903 1.45 -31.93

Colombia peso 3851.14 0.10 -22.57

Peru sol 3.7158 -0.09 -12.89

Argentina peso 896.5000 -0.06 -97.93

(interbank)

Argentina peso 1215 0.82 -98.42

(parallel)