Latam currencies rally as dollar pauses after stellar run



* Lula's lead narrows to single-digit in Brazil race - poll

* Chile consumer prices up 1.4% in July

* Colombia's new leftist govt proposes tax reform bill

By Susan Mathew and Anisha Sircar

Aug 8 (Reuters) - Latin American currencies jumped on Monday as the dollar gave back some of its recent gains, with Chile's peso leading the rally on support from higher prices of its key export, copper.

The dollar =USD eased to 106.23 following a 10-day high of 106.93 on Friday. Strong U.S. jobs data had taken bets of a 75 basis points hike by the Federal Reserve in September to 70%, fuelling flows into the dollar last week.

Chile's peso CLP= jumped 1.3%, tracking stronger copper prices, which were boosted by rising imports by China. The world's top copper producer saw exports of the red metal reach $3.42 billion in July, down 25% from a year earlier, Chile's central bank said.

Inflation in the Andean country, meanwhile, rose to 1.4% in July, accelerating from 0.9% in the previous month and ahead of an expected 1.15% rise in a Reuters poll.

Brazil's real BRBY BRL= jumped 1%. Former President Luiz Inacio Lula da Silva's lead over incumbent Jair Bolsonaro has narrowed to 7 percentage points ahead of the October election, according to a new poll.

"Bolsonaro’s poll numbers could continue to improve in the coming weeks because of lower fuel prices, improvements in the job market and larger social benefits, but we don't expect significant shifts in the polls until campaigning begins in earnest next month," said Elizabeth Johnson and Wilson Ferrarezi, economists at TS Lombard.

"Bolsonaro is finally seeing some positive tailwinds, but he will still face significant challenges to be re-elected... Meanwhile, the Lula campaign will continue to focus on persuading supporters of third-party candidates to cast a tactical vote for him in the first round."

Mexico's peso MXN= was up 0.8%. Inflation data due on Tuesday will precede an interest rate decision by the country's central bank later in the week.

Analysts project annual inflation will hit 8.13% in July, a level not seen since December 2000, fueling bets the bank will continue hiking its key rate through the rest of the year.

On Thursday, Banxico, as the bank is known, is seen hiking by 75 bps to 8.50%, as per Refinitiv.

High borrowing costs in the United States have previously spurred currency crises in emerging markets, but analysts say central banks in the developing world may be more prepared this time round.

Despite broader inflationary and geopolitical pressures, Latam's currencies index .MILA00000CUS is up more than 11% on the year, while the stocks index .MILA00000PUS has gained about 3%.

Colombia's peso COP= rose 0.7%. The country's new leftist government proposed a tax reform bill to lawmakers which would raise some 25 trillion pesos ($5.76 billion) in 2023 to increase revenue for anti-poverty programs.

Key Latin American stock indexes and currencies at 1915 GMT:

Stock indexes

Latest

Daily % change MSCI Emerging Markets

1002.13

-0.07 .MSCIEF

MSCI LatAm

2203.36

2.74 .MILA00000PUS

Brazil Bovespa

108245.15

1.67 .BVSP

Mexico IPC

47086.77

0.78 .MXX

Chile IPSA

5244.20

0.61 .SPIPSA

Argentina MerVal

123568.76

2.12 .MERV

Colombia COLCAP

1320.40

1.56 .COLCAP

Currencies

Latest

Daily % change Brazil real

BRBY

5.1126

1.05

Mexico peso

20.2608

0.75 MXN=D2

Chile peso

CLP=CL

905.3

1.35

Colombia peso COP=

4306.96

0.67 Peru sol

PEN=PE

3.9142

-0.45

Argentina peso

133.5600

-0.48 (interbank) ARS=RASL

Argentina peso

287

2.09 (parallel) ARSB=


Reporting by Susan Mathew and Anisha Sircar in Bengaluru; editing by Barbara Lewis and Marguerita Choy

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