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Brazil's economic activity up in May despite flood tragedy

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Mexico's Mejia says rate cuts should be gradual

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Peru cenbank sees economy growing 4% in second quarter

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Argentina to sell dollars on parallel market

(Updated at 3:35 p.m. ET/1935 GMT)

By Johann M Cherian

July 15 (Reuters) - Mexico's peso led declines across

Latin American currencies on Monday, as investor expectations on

the likelihood of a second term for former U.S. President Donald

Trump and declines in commodity prices fanned the risk-off mood.

The currency of the second-largest economy in the region,

Mexico depreciated close to 1%, as Trump cements his hold

on his Republican Party at its 2024 convention this week, having

survived an assassination attempt.

The former U.S. president's policies on trade protectionism

and against illegal immigration are seen as negative for

emerging markets.

"The most exposed country in terms of risks relative to the

current condition is Mexico, given issues on trade where Mexico

has overtaken China in terms of bilateral trade balance and the

issue of immigration on southern border as well as security,"

said Olga Yangol, head of EM research & strategy at Credit

Agricole.

Elsewhere, Banxico Deputy Governor Omar Mejia's comments on

gradual adjustments to the local benchmark interest rate did

little to support the currency, as per a report.

Brazil's real slipped 0.3% to 5.44 per dollar.

Economic activity in the region's largest economy increased by a

seasonally adjusted 0.25% in May from the previous month,

showing resilience despite severe flooding in the country's

southernmost state during the period.

The world's largest copper exporter, Chile's peso

weakened 0.4%, as prices of the red metal lost its shine after

economic growth data from top consumer China weighed on demand

outlook.

Oil exporter Colombia's peso shed 0.4%, as crude

prices slipped.

Peru's sol inched up 0.2% in thin trades, after

touching nearly two-month highs in the previous session. The

local central bank said it expects second-quarter annualized

Gross Domestic Product (GDP) growth to land around 4% and around

5% for the month of May, returning to growth after the economy

fell into a technical recession last year.

Most South American currencies are down so far this year

against the dollar as a combination of local interest rate cuts,

firmer dollar as the Federal Reserve has held back from cutting

rates and regional political jitters decreased the appeal for

the traditionally risky assets.

On the equities front, MSCI's index tracking local bourses

slipped 0.1%, with Mexican stocks down

about 1%.

Argentina's peso strengthened more than 7% in

parallel trade, while the MerVal stock index dropped

over 11%. The Javier Milei-led government said the local central

bank will start selling U.S. dollars in the country's parallel

foreign exchange markets in an effort to combat inflation and

freeze the country's money supply.

Key Latin American stock indexes and currencies:

Latest Daily % change

MSCI Emerging Markets 1120.00 -0.32

MSCI LatAm 2320.38 -0.09

Brazil Bovespa 129373.35 0.37

Mexico IPC 54376.92 -1.05

Chile IPSA 6559.84 0.15

Argentina MerVal 1524749.96 -11.125

Colombia COLCAP 1370.80 -0.24

Currencies Latest Daily % change

Brazil real 5.4438 -0.25

Mexico peso 17.7670 -0.91

Chile peso 908.9 -0.39

Colombia peso 3943.81 -0.42

Peru sol 3.7068 0.16

Argentina peso 922.0000 -0.27

(interbank)

Argentina peso 1395 7.53

(parallel)