Most Latam FX gain; Mexican peso up for 4th straight day

Most Latin American currencies firmed on Wednesday, joining broader emerging market peers, as the dollar and US Treasury yields fell a day before much awaited US inflation data.

Brazil's real firmed as much as 0.3%, before trading slightly lower as annual inflation came in above expectations, hitting 8% for the first time in four years and making a stronger case for an interest rate hike by Brazil's monetary policy committee, Copom.

"Copom will (also) probably signal that another 75 basis point hike is on the cards at the subsequent meeting in August," said William Jackson, chief EM economist at Capital Economics.

The central bank is due to meet next week and Capital Economics and Citi expect it to hike by 75 basis points to 4.25%.

In Mexico, inflation rose again in May, but the central bank will likely stand pat on interest rates as long as core inflation falls back in the next few months, Jackson said.

Rising for a fourth straight session, Mexico's peso was up 0.5%, not far from 2021 highs hit in January.

The currency has turned positive for the year, following a rally spurred by mid-term election results that lessened the likelihood of sweeping changes to market friendly policies.

Chile's peso rose 0.3% despite a dip in prices of copper, its main export. Chile's central bank late on Tuesday kept interest rates unchanged at 0.5%, in line with expectations.

But the central bank's "statement sounded more hawkish in other dimensions", Citi strategists wrote in a note. The bank's changed tone suggested the normalization cycle could be brought forward, they said.

Sao Paulo's Bovespa index fell for the first time in nine sessions, slipping 0.1%, but losses were capped by a 4.3% rise in shares of carrier Gol Linhas after it bought airline MAP Transportes Aéreos for 28 million reais ($5.56 million).

Peru's main stocks index traded flat, while its currency slipped 0.2%. Vote counting after a presidential election over the weekend is almost drawing to a close with socialist Pedro Castillo holding a lead of just 70,000 votes over rival Keiko Fujimori.

Right-wing conservative Fujimori is expected to find support from overseas votes, and with several votes being contested, the results may take time to be declared.

Losses for the sol currency now stand at 8% since Castillo's surprise win in the first round vote in April.

Eyes are now on US inflation numbers as well as the European Central Bank's meeting on Thursday to see if major central banks will start the withdrawal process for pandemic- induced stimulus.