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EMERGING MARKETS-Brazilian real tumbles over 1%, lags Latam FX peers

    * Brazil's real leads declines among Latam FX
    * Chilean peso rises with higher copper prices
    * Argentine stocks hit over two-week highs

 (Adds comments, bullets; Updates prices throughout)
    By Shreyashi Sanyal
    March 15 (Reuters) - Brazil's real underperformed broader
emerging market peers on Monday, after its best week in more
than three months, with eyes on a central bank meeting where
surging inflation is expected to force a rate hike.
    The real fell 1.3% to 5.631 per dollar after
gaining 2.5% last week. On the year, the currency is one of the
worst-performing among emerging market peers, down nearly 8%
compared with a 0.6% slip in the broader EM index
.
    "Prospects for the Brazilian real suffered from a surprise
Supreme Court decision to overturn the conviction of former
President Lula da Silva," said Alejo Czerwonko, chief investment
officer, emerging markets Americas at UBS.
    Czerwonko said this combined with current Brazilian
President Jair Bolsonaro's push for more fiscal spending to
appeal to voters would increase the already high level of fiscal
risk in the country and advised investors to remain on the
sidelines while investing in the real. 
    Brazil's expected inflation for 2021 shot up to a new high
of 4.6%, a central bank survey showed, significantly above the
bank's year-end target of 3.75%. Rising inflation, deepening
fiscal uncertainty and a weak exchange rate could see a 50 basis
point increase in interest rates on Wednesday, a Reuters poll
showed.
    The hike would be the first in six years.     
    The bank sold 10,000 foreign exchange swaps contracts at
auction on Monday, continuing its intervention to support the
currency. 
    Meanwhile, Bolsonaro is weighing candidates to replace
Health Minister Eduardo Pazuello, sources said, in what would be
the fourth person in a year in the role as COVID-19 cases rage
out of control.
    As the dollar strengthened, EM currencies trimmed gains,
with some moving into the red.
    Mexico's peso rose, while copper producer Chile's
peso tracked prices of the red metal higher. The Chilean
peso is among the best performing Latam currency year-to-date
thanks to copper prices hitting decade highs.
    Colombia's peso extended losses to a third straight
session as crude prices declined. 
    Focus this week will be on the U.S. Federal Reserve's rate
decision on Wednesday as well as the first meeting between
Washington and Beijing since U.S. President Joe Biden took
office. 
    Latam stocks rallied, with Argentine shares in the
lead, up 2.9% to hit over two-week highs. 
    
    Key Latin American stock indexes and currencies at 1916 GMT:
    
           Stock indexes                     Latest    Daily %
                                                        change
 MSCI Emerging Markets                        1340.60     -0.56
 MSCI LatAm                                   2299.41     -0.29
 Brazil Bovespa                             114652.22      0.43
 Mexico IPC                                  47769.87       0.2
 Chile IPSA                                   4913.94       0.4
 Argentina MerVal                            50501.83     2.916
 Colombia COLCAP                              1357.59      0.29
                                                               
               Currencies                    Latest    Daily %
                                                        change
 Brazil real                                   5.6311     -1.29
 Mexico peso                                  20.6694      0.27
 Chile peso                                     722.4      0.18
 Colombia peso                                3557.72      0.44
 Peru sol                                      3.7027      0.16
 Argentina peso (interbank)                   91.0600     -0.22
                                                       
 Argentina peso (parallel)                        143     -0.70
                                                       
 
 

 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Marguerita Choy)
  
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