* Fed update on U.S. economy awaited; statement at 1800 GMT * Brazil posts steepest monthly deflation since 1998 * Mexican economy likely shrank 17% in April -finance minister * OECD sees deepest peacetime slump in a century By Susan Mathew June 10 (Reuters) - Latin American currencies firmed on Wednesday as the dollar retreated ahead of a U.S. Federal Reserve meeting that is being watched for an assessment of the health of the world's largest economy. Investors are waiting to see if the Fed reinforces the upbeat tone of economic recovery set by the latest unemployment data. Amid speculation that it might take measures to curb a recent steepening of the U.S. yield curve, the greenback weakened broadly. A Fed statement is expected at 1800 GMT, followed by a news conference by Fed Chair Jerome Powell. Brazil's real gave back some early gains after data showed the country posted its steepest monthly deflation since 1998 as the coronavirus outbreak slammed fuel and air travel prices. This raised bets of another interest rate cut further into record low territory next week. After a pullback on Tuesday, Mexico's peso rose 0.3%. The Mexican economy most likely shrank 17% in April and will probably contract "a little less" in May, the finance minister said, as officials further re-open the country after more than two months of lockdown. "Economic recovery is likely to be very slow," said You-Na Park-Heger, an analyst at Commerzbank, citing policy uncertainty by the government and likely interest rate cuts as risks for the currency. The Organisation for Economic Cooperation and Development expects the global economy to contract 6% this year, the biggest peacetime downturn in a century, before it emerges next year from a recession. The Colombian peso rose 0.2%, while surging copper prices sent Chile's peso up almost 1%. As a Friday deadline approaches, Argentina's $65 billion debt restructuring is being closely watched, with the government and its creditors in a sensitive final stretch to strike a breakthrough. Citigroup strategists expect yet another extension of the deadline as the government prepares a second amended proposal. Key Latin American stock indexes and currencies at 1322 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1014.91 0.52 MSCI LatAm 2118.81 0.54 Brazil Bovespa 96980.27 0.24 Mexico IPC - - Chile IPSA - - Argentina MerVal - - Colombia COLCAP - - Currencies Latest Daily % change Brazil real 4.8730 0.29 Mexico peso 21.8321 0.32 Chile peso 763.3 0.85 Colombia peso 3651.24 0.15 Peru sol - - Argentina peso 69.2500 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru;)
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