Brazil's real leads fall in Latam FX, Chile's peso down as copper output drops

<html xmlns=""><head><title>EMERGING MARKETS-Brazil's real leads fall in Latam FX, Chile's peso down as copper output drops</title></head><body>

Colombia 12-month inflation through May seen at 12.60%

Brazil's jobless rate below market expectation

Latam FX down 0.3%, stocks down 0.7%

Updates prices throughout, adds analyst view in paragraph 6, Brazil data and Reuters poll on Colombia inflation

By Siddarth S, Amruta Khandekar and Ankika Biswas

May 31 (Reuters) -Latin American currencies fell against a firm dollar on Wednesday, with the Brazilianreal spearheading the decline onmounting bets of rate cuts, while Chile's peso fell due to a drop incopper output.

The real BRL= was down 0.8%, hitting its lowest level in two months intraday.

The real dropped for the third day, with evidence of falling inflation stoking concerns of heightened pressure on the Brazilian central bank to lower interest rates amid a dispute with President Luiz Inacio Lula da Silva over inflation targets.

"I think investors are wary of too much political pressure falling on BACEN (Brazil's central bank) to cut rates," said Chris Turner, Global head of strategy and head of EMEA and Latam research at ING.

Freshdata showed Brazil's formal job creation missed estimates in April, whileanother set highlighted the country's jobless rate falling to 8.5% in the three months through April, below market expectations.

Analysts at Goldman Sachs expect the country's labor market to soften slightly in coming quarters given the expectation of below-trend growth.

Meanwhile, a Reuters poll showed Brazil's economy likely surged back to growth in the first quarter of the year.

The Chilean peso CLP= dropped 0.7% after data showed the country's copper output fell 1.1% year-on-year in April while manufacturing also took a hit.

Chile, the world's biggest copper producer and a major exporter of the metal to China, was also pressured by a slide in copper prices as a surprising deterioration in China's factory activity raised concerns about the outlook for metals demand given faltering economic growth.

"Given the strong dollar environment, weak China data and now soft copper production figures for April, USD/CLP looks biased higher for the near term," Turner said.

The Colombian peso COP= was down 0.6% as a dip in oil prices pressured the currency of the leading crude exporter.

AReuters poll revealed Colombia's inflation in May might have receded due to a slowdown in food price growth, prompting analysts to cut their inflation expectations for the year.

However, the peso remained the best performing Latam currency in May, with over 6% gains, while the Brazilian real dropped 1.8% this month.

With dollar =USD jumping to a more than two-month high after data signaling a quicker-than-expected slowdown in European inflation and China's sputtering recovery, MSCI'sLatin American currencies index .MILA00000CUS fell 0.3%. On month, the index shed 0.8%.

Latam currencieshave been pressured by concerns over China's weak post-pandemic recovery and thedollar's rally with market expectations of higher for longer U.S. interest rates seeing a boost from solid U.S. economic data.

Meanwhile, Argentina's central bankpurchased $451 million of foreign currency to bolster its dwindling hard currency reserves, after daily sales from farm exports topped $1 billion, providing some relief for the country's hard-hit finances.

Latam stocks .MILA00000PUS were down 0.7%, hitting a near one-month low.

Shares of BRF SA BRFS3.SA jumped 12% after Saudi Arabia's agricultural and livestock investment firm SALIC and Brazilian meatpacker Marfrig MRFG3.SA pledged to make a $900 million investment in the Brazilian food producer.

Key Latin American stock indexes and currencies at 1455 GMT:

MSCI Emerging Markets .MSCIEF






Brazil Bovespa .BVSP



Mexico IPC .MXX






Argentina MerVal .MERV








Daily % change

Brazil real BRBY



Mexico peso MXN=D2



Chile peso CLP=CL



Colombia peso COP=



Peru sol PEN=PE



Argentina peso (interbank) ARS=RASL



Argentina peso (parallel) ARSB=



Reporting by Siddarth S in Bengaluru, Editing by Nick Zieminski and Marguerita Choy


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