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EMERGING MARKETS-Mexican peso set for best week in over a year on hawkish c.bank move

    * Mexican c.bank raises rates in surprise move
    * MSCI rescinds Argentina's emerging market status
    * Latam FX to add 2% this week

 (Updates prices throughout)
    By Ambar Warrick
    June 25 (Reuters) - Mexico's peso was set to clock its best
week in over a year on Friday after a surprise interest rate
hike, while Latin American currencies were set to outpace their
emerging market peers this week on a slew of hawkish central
bank signals. 
    The peso was flat after surging 1.6% on Thursday- its
best day in 2021 so far. The currency was also set for its best
week in more than a year, with a 4% jump.
    The Mexican central bank unexpectedly hiked rates to 4.25%,
citing a recent rise in local inflation, as well as possible
price spillovers from the United States.
    "This suggests to us that year-on-year core inflation, and
core inflation momentum, will need to show evidence of easing,
and that Banxico will continue to tighten policy (at a minimum)
until that is achieved," Sacha Tihanyi, head of emerging markets
strategy at TD Securities, wrote in a note. 
    Argentine markets remained in focus after MSCI said it would
reclassify its Argentina index to Standalone Markets status,
from Emerging Markets, citing issues over strict capital
controls.
    JPMorgan predicted $610 million of capital outflows from
Argentina, due to the reclassification. But the peso
showed little reaction due to the capital controls. 
    Brazil's real, which was down 1% on Friday,
was set to add 2.6% this week after minutes of the central
bank's last meeting showed a 100 basis point hike was on the
cards.
    The real has benefited greatly from a hawkish central bank,
and recently hit a one-year high. It is also among the best
performing emerging market currencies this year. 
    Data on Friday showed Brazilian consumer inflation surged in
the first half of June, while a separate reading showed the
country's current account deficit at its smallest in more than
13 years.
    Chile's peso rose 0.2%, and was set to add 2% this
week after the minutes of the Chilean central bank's last
meeting showed it was considering an interest rate hike.

    The hawkish signals put MSCI's index of Latam currencies
 on course for a weekly gain of 2%, outpacing a
0.2% rise in the index of broader EM currencies.
    The Latam index has performed far better than its EM peer
this year, adding more than 4%, compared to a 1.4% gain. 
    Latin American stocks have marked a similar
milestone, after largely lagging their peers through 2020.
    
    Sentiment towards emerging markets was bolstered on Friday
after U.S. consumer spending data - a key gauge of inflation for
the Fed - remained unchanged in May, furthering the Fed's stance
that inflation was likely to be transient. 
    
    Key Latin American stock indexes and currencies at 1924 GMT:
    
           Stock indexes                    Latest    Daily %
                                                      change
 MSCI Emerging Markets                       1378.42     0.81
 MSCI LatAm                                  2647.90    -1.46
 Brazil Bovespa                            126800.87    -2.09
 Mexico IPC                                 50536.31    -0.04
 Chile IPSA                                  4349.19    -1.63
 Argentina MerVal                           64775.08   -3.224
 Colombia COLCAP                             1277.93    -0.07
                                                             
               Currencies                   Latest    Daily %
                                                      change
 Brazil real                                  4.9594    -1.10
 Mexico peso                                 19.8821    -0.16
 Chile peso                                    733.7     0.08
 Colombia peso                               3742.15     0.56
 Peru sol                                     3.9797     0.10
 Argentina peso (interbank)                  95.6000    -0.04
                                                      
 Argentina peso (parallel)                       171    -0.58
                                                      
 
    
    

    
 (Reporting by Ambar Warrick and Shreyashi Sanyal; Editing by
Angus MacSwan  and Alistair Bell)
  
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