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Lula backs spending cuts to meet Brazil's fiscal framework

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Chilean central bank releases June policy meeting minutes

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Kenya's president, IMF chief speak after tax hikes pulled

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Latin American stocks up 1.1%, currencies up 1%

(Updated at 03:33 p.m. ET/ 1933 GMT)

By Johann M Cherian and Shristi Achar A

July 4 (Reuters) - Brazil's real led gains among Latin

American currencies on Thursday after President Luiz Inacio Lula

da Silva committed his government to fiscal stability, while

markets also reacted to the release of central bank policy

meeting minutes in Chile.

Brazil's real jumped 1.5% to 5.48 to the dollar after

Lula ordered his economic team to comply with the country's

fiscal framework and approved suggestions of spending cuts, the

country's finance minister said.

The currency jumped more than 2% on Wednesday, its biggest

one-day rise since January, in the run-up to the meeting between

the Brazilian leader and his economic team. The real recently

suffered losses in which it depreciated to lows of more than two

years on concerns of fiscal sustainability in the region's

biggest economy.

"Although we expect President Lula will shift to a more

pragmatic discourse once he internalizes the consequences of

double-digit interest rates, we are concerned this could come

too late, as the debt burden escalates exponentially," said

Felipe Camargo, senior economist of the global EM team at Oxford

Economics.

More broadly, the MSCI index that tracks Latin American

currencies strengthened 1% to more than a

one-week high against the dollar. Trading was thin as U.S.

markets were closed due to the Independence Day holiday.

Market attention is now on the U.S. government's closely

watched monthly employment report on Friday, which could provide

clues to the Federal Reserve's likely monetary policy path and

the outlook for the dollar.

Mexico's peso added 0.4%. Mexican President-elect

Claudia Sheinbaum on Thursday named Omar Garcia Harfuch as

security minister.

Traders also parsed Sheinbaum's latest criticism of the

Mexican judiciary. Concerns about judicial independence under

Sheinbaum's incoming government have pushed the currency to

notch its biggest quarterly drop since the COVID-19 pandemic.

Chile's peso strengthened 0.8% as copper prices were

steady. The South American nation is the world's largest

producer of the metal.

Minutes from the Chilean central bank's policy meeting last

month showed it considered cutting the benchmark interest rate

by 50 basis points or keeping it unchanged. The central bank

opted for a 25 basis-point reduction to 5.75% at the meeting.

Peru's sol inched up 0.2% in thin trading. Economy

Minister Jose Arista said the copper exporter's economy likely

grew between 4.5% and 5% on a year-on-year basis in May, in what

would be the second consecutive month of growth.

Colombia's peso added 0.3%.

The MSCI index that tracks regional bourses

rose 1.1% to a one-month high, aided mostly by heavy-weight

Brazilian equities.

Elsewhere, Kenyan President William Ruto spoke with

International Monetary Fund chief Kristalina Georgieva after he

withdrew proposed tax hikes after deadly protests. The hikes

were central to the IMF's $3.6 billion lending programme for the

East African nation, according to sources.

Key Latin American stock indexes and currencies:

Latin American market prices from

Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1104.23 1.09

MSCI LatAm 2233.84 1.15

Brazil Bovespa 126271.19 0.48

Mexico IPC 52698.89 -0.18

Chile IPSA 6525.19 -0.14

Argentina MerVal 1614465.83 0.683

Colombia COLCAP 1386.03 0.33

Currencies Latest Daily %

change

Brazil real 5.4846 1.52

Mexico peso 18.0857 0.41

Chile peso 934.2 0.88

Colombia peso 4092.55 0.29

Peru sol 3.7792 0.26

Argentina peso (interbank) 913.5000 0.11