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Brazil's economic activity beats forecast in August

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Rate decision in Chile later in the week

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MSCI Latam stocks index up 1.45%, FX adds 0.8%

(Updated at 1953 GMT)

By Shashwat Chauhan and Johann M Cherian

Oct 14 (Reuters) - Most currencies of resources-rich

Latin America slipped on Monday, tracking weak commodity prices,

while robust Brazilian economic data bolstered the case for

interest rate hikes and strengthened the real.

China pledged on Saturday to "significantly increase"

spending to revive its sputtering economy, but left investors

guessing the overall size of the stimulus package.

Crude oil prices slipped more than 1%, while prices of base

metals such as copper also tumbled on a lack of detail on

China's stimulus plans.

Oil producer Mexico's peso slipped 0.7%, while

Colombia's peso held steady in choppy trading.

Currencies of top copper producers in the region Chile

and Peru lost 0.1% and 1%, respectively.

Later in the week, Chile's central bank is expected to lower

its benchmark interest rate by 25 basis points to 5.25%, a poll

of traders released by the bank showed.

Bucking the trend, the real ticked up 0.6% to 5.58

per dollar in turbulent trading. Brazil's economic activity

again surprised on the upside in August, central bank data

showed, reinforcing a view of heated economic momentum that

prompted policymakers to kick off a monetary tightening cycle

last month.

"While the data is positive, indicating that Brazil's

economic activity remains strong, it also reinforces the central

bank's decision to raise interest rates during the last COPOM

meeting," said Matheus Zani, FX risk manager at Deaglo.

Brazil's central bank sees strong economic activity as a

major factor behind its monetary policy decision, incoming

Governor Gabriel Galipolo said.

Two sources from Brazil's Finance Ministry told Reuters

that President Luiz Inacio Lula da Silva's government is

preparing to roll out measures to curb mandatory spending after

a second round of municipal elections at the end of the month.

Concerns about Brazil not meeting its annual fiscal

targets, along with a monetary policy pivot earlier this year

have sparked uncertainty about the region's largest economy. The

real and the Bovespa are both on track for losses this

year.

MSCI's index for Latin American currencies

was last up 0.8%, while stocks

added 1.45%.

Other bourses were mixed, with Argentina's Merval index

and Colombia's main index up over 1% each,

while the Mexican benchmark fell 1%.

Most EM assets ex-China posted marginal gains and losses

last week as brimming tensions in the Middle East and the

continuous repricing of the U.S. Federal Reserve's interest rate

path led to choppy trading.

On Thursday, a U.S. retail sales reading and jobless claims

data could set the tone for market expectations around the Fed's

rate path.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1159.77 0.02

MSCI LatAm 2216.81 1.46

Brazil Bovespa 131042.84 0.81

Mexico IPC 51870.08 -1

Chile IPSA 6572 -0.01

Argentina Merval 1802738.7 1.108

2

Colombia COLCAP 1326.48 1.25

Brazil real 5.5798 0.58

Mexico peso 19.3832 -0.66

Chile peso 927.5 -0.12

Colombia peso 4207.45 0.10

Peru sol 3.758 -1.03

Argentina peso 979.5 -0.46

(interbank)

Argentina peso (parallel) 1170 0.85