(Updates prices, adds market strategist's quote) By Aaron Saldanha May 16 (Reuters) - Most Latin American currencies weakened on Thursday against the dollar, with Mexico's peso in focus following the release of the central bank's outlook, while Brazil's real skidded on growth fears. Mexico's peso softened 0.4% after Banco de Mexico (Banxico) matched most investors' expectations by leaving borrowing costs at 8.25%. The bank cited possible pressure on the peso's exchange rate as a risk for inflation to quicken. More broadly, MSCI's index of Latin American currencies eased 0.2%, while MSCI's Latin American stocks index was 1.3% lower, after hitting a 2019 low. "Banxico believes the near term pickup in inflation is transitory, but its focus on wage increases and cost pressures implies a high level of vigilance and little room to cut rates in 2019," Sacha Tihanyi, TD Securities' deputy head of emerging markets strategy, wrote in a note. Also on Thursday, Mexican President Andres Manuel Lopez Obrador said Mexico received $10 billion in foreign direct investment in the first quarter of 2019, seeking to allay doubts about his economic management and fears over a potential ratings downgrade. Mexican stocks rose 0.2%, largely on gaining financials. Brazil's real dived 1.1% to a more than seven month closing low, while yields on local 10-year bonds rose 11 basis points to 9.01%. Investor sentiment towards Brazil chilled as central bank president Roberto Campos Neto acknowledged there is a "relevant probability" the economy contracted slightly in the first quarter. He also said controlling inflation hinged on the approval and implementation fiscal reforms, with markets delaying investment until uncertainty reduces. Bank of America Merrill Lynch economists cut their Brazilian growth forecasts and changed their interest rate call to predict aggressive policy easing this year. Sao Paulo-traded stocks slid 1.8%, weighed down by losses among financials and materials, as they neared the point at which they began the year. Mining firm Vale SA reversed early gains to slide 3.2%. It told prosecutors in the state of Minas Gerais a dam is at risk of rupturing at its Gongo Soco mine, not far from where another of its dams collapsed in January, resulting in the deaths of more than 230 people. Argentina's peso firmed, while stocks tacked on 2%. Latin American stock indexes and currencies at 2100 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1011.15 -0.47 MSCI LatAm 2553.00 -1.33 Brazil Bovespa 90024.47 -1.75 Mexico IPC 43442.49 0.24 Chile IPSA 4977.75 -0.55 Argentina MerVal 33892.17 2.03 Colombia IGBC 12275.61 0.22 Currencies daily % change Latest Brazil real 4.0450 -0.22 Mexico peso 19.1190 -0.38 Chile peso 693.7 -0.42 Colombia peso 3297.5 -0.45 Peru sol 3.317 0.00 Argentina peso (interbank) 44.7300 0.60 (Reporting by Aaron Saldanha in Bengaluru; editing by Grant McCool)
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