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EMERGING MARKETS-Mexican peso up ahead of likely interest rate hike

       By Susan Mathew
    Aug 11 (Reuters) - Most Latin American currencies joined a
broader tick up in emerging market shares as optimism from
softer growth in U.S. inflation continued, with focus turning to
a slew of central bank decisions from the region due later in
the day.
    Mexico's central bank is expected to deliver a second
consecutive 75 basis points hike, taking the benchmark interest
rate to a new historic level of 8.5% after inflation surged to
its highest level in nearly 22 years in July.

    "An even bigger rate step cannot be ruled out and would
probably boost the peso," said Elisabeth Andreae, FX and EM
analyst at Commerzbank.
    Mexico's peso was up 0.5%, staying  close to six-week
highs hit last session.
    Peru's central bank is seen hiking its key rate by 50 bps,
in what would be its 13th straight hike, to 6.5%. Peru's annual
inflation rate stood at 8.74% on a year-on-year basis in July,
edging lower from its highest in a quarter of a century.
    Meanwhile, Argentina's tightly controlled peso fell
0.2% ahead of inflation data for July. Traders expect the
central bank to hike rates by 600 basis points to 66% on
Thursday as analysts now expect inflation to hit 90.2% in 2022.

    Several emerging market central banks have embarked upon
monetary policy tightening cycles in the face of surging prices
as economies recover from the shock of the COVID-19 pandemic and
the Russian-Ukraine war.
    Additionally, they've had to stay ahead of the U.S. Federal
Reserve's tightening cycle. Some relief came on Wednesday when
data showed U.S. inflation remained unchanged in July, prompting
markets to scale back expectations of a third 75 bps hike in
September.
    Brazil's real, which has outperformed this year
thanks to one the world's most aggressive central bank
tightening cycles, edged lower.
    Data showed services activity in Brazil rose for the second
month in a row in June, beating expectations. The sector
accounts for about 70% of all activity in Latin America's
largest economy.
    The real is in for volatility as October presidential
elections approach. In his re-election bid, President Jair
Bolsonaro said he plans to proceed with simplifying the tax
regime, lower taxes for companies and reduce import tariffs to
foster trade.
    Bolsonaro did not mention privatizing state-controlled oil
company Petrobras, in contrast to his 2018 election
plan that dedicated specific pages to Petrobras.
    Petrobras shares were up 0.3%, in line with higher oil
prices.

    Key Latin American stock indexes and currencies at 1418 GMT:
   Stock indexes            Latest    Daily %
                                      change
 MSCI Emerging Markets       1017.06     1.99

 MSCI LatAm                  2275.77      0.2

 Brazil Bovespa            110835.74     0.54

 Mexico IPC                 48049.43      0.5

 Chile IPSA                  5268.83    -0.08

 Argentina MerVal                  -        -

 Colombia COLCAP             1319.20     0.39


       Currencies           Latest    Daily %
                                      change
 Brazil real                  5.0912    -0.14

 Mexico peso                 19.9280     0.44

 Chile peso                      883     0.46

 Colombia peso               4233.23     0.82
 Peru sol                      3.889    -0.27

 Argentina peso             134.2000    -0.14
 (interbank)



 (Reporting by Susan Mathew in Bengaluru; Editing by Susan
Fenton)

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