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EMERGING MARKETS-Brazilian real falls for the week; Mexican peso eyes weekly gain

    * Brazil's service sector rebounds in April
    * Mexico industry output suffers setback in April  
    * Peru's Castillo cites 'victory' as vote count nears end

 (Adds comments, bullets, details; Updates prices throughout)
    By Susan Mathew and Shreyashi Sanyal
    June 11 (Reuters) - Latin American currencies weakened
against a strong dollar on Friday, with Brazil's real on track
for its worst session in three weeks. 
    The greenback bounced back strongly after declines
when investors shrugged off data showing higher U.S. inflation
as transitory.
    The real fell around 1%, on track for a weekly loss
of around 1.3%.   
    Brazilian services sector rebounded in April, official
figures showed on Friday, though it failed to recover all the
ground lost in March and activity remained below levels in
February last year before the pandemic struck.
    A Reuters poll showed, Brazil's central bank will announce
the third consecutive 75 basis point hike of its benchmark rate
next week, and possibly hint at a more aggressive cycle ahead by
dropping its commitment to a "partial normalization" of policy.

    "At the last meeting, the central bank gave a clear steer
that a 75bp hike is on the cards," said Jonathan Petersen,
markets economist at Capital Economics. 
    "We see nothing in the latest data to change that: inflation
has continued to rise far above target and the economy has
started to recover."
    Mexico's peso fell 1% after data showed industrial
output fell month-on-month for the first time in 11 months in
April, even as activity rose by a record margin from the
previous year.
    But optimism after mid-term elections has pushed the peso to
positive territory for the week - its best week since early May.
 
    "Hopes of a rapid recovery from the pandemic are supporting
the peso, as are expectations of interest rate hikes. But much
seems to be priced in already," said Commerzbank analysts. 
    "(With the) expected start of (the U.S. Federal
Reserve)tapering from Q4 2021 and expected discussions on first
rate hikes, challenging times are likely ahead (for the peso)."
    Chile's peso fell 0.4% as rising COVID-19 cases kept
sentiment in check with Chilean health authorities announcing a
blanket lockdown across the capital Santiago on Thursday.

    Second biggest copper exporter Peru's sol was flat.
Socialist Pedro Castillo held his slim lead in presidential
elections as counting nearly drew to a close. But with rival
Keiko Fujimori contesting ballots, the final results may take a
while.
    Among stocks, Brazilian food processor BRF SA
rose up to 10% after o Globo columnist Lauro Jardim reported
meatpacker JBS SA is interested in potentially
acquiring the company. Rival meatpacker Marfrig Global Foods
 announced last week it reached a 31% stake in BRF.

    Embraer extended its rally after Zanite
Acquisition Corp confirmed merger talks with the
Brazilian planemaker's subsidiary Eve Urban Air Mobility
Solutions.
    
    Key Latin American stock indexes and currencies at 1847 GMT:
    
         Stock indexes                  Latest    Daily %
                                                  change
 MSCI Emerging Markets                   1379.81     0.07
 MSCI LatAm                              2645.61    -0.73
 Brazil Bovespa                        129080.75    -0.77
 Mexico IPC                             51300.22     0.81
 Chile IPSA                              4303.42     1.01
 Argentina MerVal                       66058.72   -3.061
 Colombia COLCAP                         1264.35     0.33
                                                         
             Currencies                 Latest    Daily %
                                                  change
 Brazil real                              5.1155    -0.97
 Mexico peso                             19.8732    -0.98
 Chile peso                                722.7    -0.39
 Colombia peso                           3652.25    -1.33
 Peru sol                                   3.89     0.07
 Argentina peso (interbank)              95.1300    -0.02
                                                  
 Argentina peso (parallel)                   155     1.29
                                                  
 
 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Nick Zieminski)
  
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