Brazil's real rises, Mexican peso hits two-week low

Most Latin American currencies weakened on Friday, joining European emerging market peers in taking a breather, as the dollar rallied strongly after US inflation rose more than expected.

Emerging market currencies had gained ground this week, taking an index of developing country currencies to all-time highs. The US dollar strengthened on Friday and was on track for a weekly gain after new US data confirmed expectations about inflation.

Brazil's real bucked the trend, erasing early losses to rise 0.4%. The currency extended gains to a third straight session with iron ore prices rising. Shares in iron ore miner Vale rose 0.3% and were among top gainers on Sao Paulo's main stocks index.

The real currency is up about 2.5% for the week, taking monthly gains closer to 4%.

Mexico's peso lost up to 0.7% in the session to touch it lowest level against US currency in two weeks, with less than two weeks to go before mid-term elections.

"We maintain our base case that President Andres Manuel Lopez Obrador allied base is likely to lose its Lower House super-majority, which would help investor confidence," said TS Lombard in a client note.

The currency is down about 0.1% this week, keeping monthly gains below 1.5%.

With copper prices hit by doubts about China demand, top producer Chile's peso fell, while in Peru, the second biggest copper producer, the sol moved further into record low territory. Investors are already jittery about a likely socialist leadership in the country after final round presidential elections on June 6.

Colombia's peso tracked oil prices higher. Stocks snapped an eight-day losing streak to rise 1%, following global stocks higher on hopes that a possible $6 trillion budget for the United States for 2022 would help a global recovery.

This took weekly gains close to 3%, the most among Latam stocks benchmarks.