Colombian peso, Peruvian sol extend losses as strong dollar weighs



* Brazil producer price inflation rises

* Colombian peso leads losses for second straight day

* Chile's peso the sole gainer

By Ambar Warrick

May 4 (Reuters) - Colombia's peso and Peru's sol extended losses on Tuesday as most Latin American currencies dipped against a stronger dollar, while Chile's peso was supported by copper prices resuming their climb towards a decade high.

The dollar rose as investors awaited key U.S. readings this week, which are likely to show an economic recovery gathering steam.

A wave of COVID-19 infections in Latin America has also kept appetite for local currencies subdued, while concerns over political issues in Colombia and Peru weighed on sentiment.

The Colombian peso COP= , which fell 0.6%, led losses for a second straight day after the government withdrew a proposed tax reform, which was followed by the resignation of finance minister Alberto Carrasquilla.

Commerce minister Jose Manuel Restrepo, an economist, will become finance minister.

The government had insisted that the reform- which had sparked violent protests across the country- was vital to stabilizing Colombian finances as the country grapples with the COVID-19 pandemic.

"The new finance minister is a well regarded figure… but now has a huge challenge ahead: to explain to the population the need of a reform, that if not passed would make Colombia lose its investment grade rating," Mauricio Cardenas, former Colombian finance minister, told the Reuters Global Markets Forum.

"With a reform that produces 1% of GDP in revenues, Colombia will keep its investment grade rating."

Peru's sol PEN= dropped 0.4% to 3.8328, trading close to a record low of 3.8452 as concerns over a socialist presidency weighed. The sol has lost heavily after left-leaning presidential candidate Pedro Castillo was seen leading the polls ahead of a run-off vote in June.

Chile's peso CLP= was the sole gainer for the day, rising 0.3% as copper prices resumed their climb towards 10-year highs on hopes of recovering global demand.

Losses in Brazil's real BRBY BRL= were somewhat constrained as investors priced in a large interest hike by the Brazilian central bank on Wednesday amid rising inflation.

Economy minister Paulo Guedes said the real was poised to rise against the dollar, as the country emerges from a severely damaging wave of COVID-19 infections.

The MSCI's index of Latam stocks .MILA00000PUS tumbled 1.2%, tracking a pullback in global equities on selling in major technology stocks.

Brazil's Bovespa .BVSP dropped 1.3%, with Itau Unibanco Holding SA ITUB4.SA the top drag on the index despite a stronger-than-expected quarterly profit.

Analysts were skeptical over the bank's ability to repeat a strong performance in future quarters.

Key Latin American stock indexes and currencies:

Latest

Daily % change MSCI Emerging Markets

1334.09

-0.36 .MSCIEF

MSCI LatAm

2365.23

-1.16 .MILA00000PUS

Brazil Bovespa

117708.79

-1.26 .BVSP

Mexico IPC

48339.73

-0.33 .MXX

Chile IPSA

4633.37

0.96 .SPIPSA

Argentina MerVal

48593.02

-0.572 .MERV

Colombia COLCAP

1215.25

-0.11 .COLCAP

Currencies

Latest

Daily % change Brazil real

BRBY

5.4335

-0.30

Mexico peso

20.2307

-0.34 MXN=D2

Chile peso

CLP=CL

702.1

0.28

Colombia peso COP=

3825.75

-0.62 Peru sol

PEN=PE

3.8328

-0.44

Argentina peso

93.7100

-0.03 (interbank) ARS=RASL


Reporting by Ambar Warrick in Bengaluru; Additional reporting by Lisa Pauline Mattackal; Editing by Angus MacSwan and Andrea Ricci

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