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EMERGING MARKETS-Mexican peso jumps after central bank's surprise rate hike

    * Mexican c.bank raises overnight rates by 25 bps 
    * Brazil cenbank ups 2021 GDP growth forecast to 4.6%
    * MSCI update on Argentina in focus

 (Adds comments, updates prices throughout)
    By Shreyashi Sanyal and Ambar Warrick
    June 24 (Reuters) - Mexico's peso jumped on Thursday,
leading gains among its Latin American counterparts, after the
country's central bank unexpectedly raised its benchmark
interest rate, while a flat dollar on middling U.S. labor data
also buoyed currencies.  
    The peso rose 1.7% to a two-week high as the Mexican
central bank, commonly known as Banxico, raised its benchmark
lending rate by 25 basis points to 4.25% to protect from the
adverse effects on inflation expectations. 
    The decision follows a hawkish tilt from the U.S. Federal
Reserve last week, which signaled higher rates could come sooner
than previously planned.  
    "The surprise 25bp rate hike by Banxico suggests that its
reaction function is not as dovish as we had thought, with most
Board members increasingly worried about the inflation outlook,"
said Nikhil Sanghani, Latin America economist at Capital
Economics. 
    "With the core rate set to remain above target over the
coming months, this hawkish shift suggests that some further
tightening over the rest of the year is likely."  
    Data on Thursday showed consumer prices in the first half of
June rose more than expected, while a separate reading showed
Mexico's jobless rate declined in May. 
    Ratings agency S&P raised its forecasts for Mexican economic
growth to 5.8% for this year and 2.9% in 2022, saying Mexico was
benefiting from a strong U.S. economic recovery, via
manufacturing exports and remittances.
    While the peso had benefited from relatively higher rates at
the start of the year, hikes in regional peer Brazil, as well as
a cut in Mexican lending rates in February, have diminished the
peso's appeal for carry trade. 
    
    Brazil's real rose 1.2% as the country's central bank
raised its economic growth outlook for this year to 4.6% from
3.6%, closer to the broader market consensus.
    Sentiment toward emerging markets improved after U.S. weekly
jobless claims fell much less than expected, while new orders
for U.S.-made capital goods unexpectedly fell in May.

    The data eased some fears over imminent policy tightening by
the Fed, given that the labor market is a major factor for the
bank to consider halting its massive stimulus program. 
    Latam stocks also rose, with MSCI's index of regional stocks
 rising 1.7%, outpacing the broader emerging
market index.
    Focus was also on Argentine markets, with index provider
MSCI expected to provide an update after the U.S. market close
on whether Argentina can remain part of its benchmark emerging
market index.  
    If not, the country's assets will face relegation to
frontier markets or standalone status. Ejection from the MSCI
emerging market index could also result in outflows of $610
million from Argentinian stocks, JPMorgan calculated.  
    
    Key Latin American stock indexes and currencies at 1933 GMT:
    
         Stock indexes                  Latest    Daily %
                                                  change
 MSCI Emerging Markets                   1368.33     0.58
 MSCI LatAm                              2693.76      1.7
 Brazil Bovespa                        129205.35     0.61
 Mexico IPC                             50499.86     0.66
 Chile IPSA                              4415.86     1.04
 Argentina MerVal                       67058.44    1.465
 Colombia COLCAP                         1280.62      2.7
                                                         
             Currencies                 Latest    Daily %
                                                  change
 Brazil real                              4.9047     1.19
 Mexico peso                             19.8890     1.39
 Chile peso                                734.3     0.10
 Colombia peso                           3763.25     0.47
 Peru sol                                 3.9838    -0.13
 Argentina peso (interbank)              95.5500    -0.01
                                                  
 Argentina peso (parallel)                   167    -0.60
                                                  
 
    
 (Reporting by Ambar Warrick and Shreyashi Sanyal; Editing by
Dan Grebler and Nick Zieminski)
  
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