EMERGING MARKETS-Mexican peso pares gains after rate hike

By Susan Mathew and Anisha Sircar

Aug 11 (Reuters) - Mexico's peso pared gains on Thursday after the central bank announced an interest rate hike that met expectations, while other Latin American currencies and emerging market shares firmed on optimism for milder U.S. inflation.

The Bank of Mexico hiked the benchmark interest rate by 75 basis points to a record 8.5%, in line with estimates in a Reuters poll, and mirroring the U.S. Federal Reserve's most recent decision.

"Banxico's board members (especially those seen as usually dovish) sent a clear message by unanimously hiking. ... This underscores that the bank will maintain its hawkish tone in upcoming decisions," said Wilson Ferrarezi, economist at TS Lombard.

"However, it also left the door open for another 75 bps or 50 bps hike in September, underscoring it'll remain in data-dependent mode. This will largely depend on the August CPI (Consumer Price Index) figures and the Fed's decision in September."

Mexico's peso MXN=pared losses slightly, rising 0.3% and staying close to six-week highs hit last session.

Argentina's tightly controlled peso ARS= fell 0.2%. The country's central bank raised the benchmark 'Leliq' rate 950 basis points to 69.50%.

Peru's central bank is also seen hiking its rates for the 13th consecutive time, 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.

Several emerging market central banks have tightened monetary policy in the face of surging prices as economies recover from the COVID-19 pandemic and Russia-Ukraine war.

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. FEDWATCHFRX/

Brazil's real BRBY, which has outperformed this year due to the country's aggressive tightening cycle, fell 1.4%.

The real faces volatility as October presidential elections approach. In his re-election bid, President Jair Bolsonaro said he plans to simplify the tax regime, lower corporate taxes and reduce import tariffs to foster trade.

State-run oil company Petrobras PETR4.SA said it would lower refinery gate diesel prices by 4% starting Friday, the second cut in a week, which drew praise from Bolsonaro. Petrobras shares fell 1%.

Colombia is expected to grow 11.25% in the second quarter versus a year ago, according to a Reuters poll.

Key Latin American stock indexes and currencies at 1923 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1013.20

1.6

MSCI LatAm .MILA00000PUS

2241.82

-1.3

Brazil Bovespa .BVSP

109898.19

-0.31

Mexico IPC .MXX

48158.25

0.73

Chile IPSA .SPIPSA

5304.87

0.61

Argentina MerVal .MERV

123633.03

1.231

Colombia COLCAP .COLCAP

1321.89

0.59

Currencies

Latest

Daily % change

Brazil real BRBY

5.1605

-1.48

Mexico peso MXN=D2

19.9665

0.25

Chile peso CLP=CL

883.9

0.36

Colombia peso COP=

4225.13

1.02

Peru sol PEN=PE

3.8627

0.41

Argentina peso (interbank) ARS=RASL

134.2500

-0.18

Argentina peso (parallel) ARSB=

292

1.03

(Reporting by Susan Mathew and Anisha Sircar in Bengaluru; Editing by Susan Fenton and Richard Chang)

((susan.mathew@thomsonreuters.com;))

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