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EMERGING MARKETS-Brazil's real jumps on inflation bets, Chilean peso tracks copper

    * Brazil's 2021 inflation outlook jumps to 5% - survey
    * Mexican peso drops as economy shrinks more than expected

    By Shashank Nayar
    April 26 (Reuters) - The Brazilian real rose on Wednesday as
expectations of high inflation pointed to more interest rate
hikes, while the Chilean peso gained on higher copper prices and
a weaker dollar after falling for three straight sessions.
    The real firmed 0.7% against the dollar after a
survey of economists showed Brazil's 2021 inflation outlook rose
to 5% for the first time and the interest rate outlook hit a new
high of 5.5%, a sign that the central bank will raise rates
aggressively at its next policy meeting.
    The bank's rate-setting committee known as "Copom", which is
set to meet on May 4 and 5, is widely expected to repeat last
month's landmark 75 basis point hike, which would lift the
benchmark Selic rate to 3.50%.
    "The BCB (Central Bank of Brazil) has all but committed to
another 75 basis point hike, and we would want to see the BCB
restrain itself from shifting its tone more explicitly to the
dovish side given growth dynamics," said analysts at J.P.
Morgan.
    "This would be positive for the Brazilian real and could
lead to further outperformance, should Covid cases decline and
the BCB remain on the hawkish side."
    However, most other Latin American currencies gave back
early gains to trade lower as rising coronavirus infections and
lower oil prices outweighed a weaker dollar.
    The Mexican and Colombian pesos dropped 0.1%
and 0.5% respectively as lower oil prices hurt the currencies of
the oil exporting countries, while rising coronavirus infections
in the region weighed on risk sentiment.
    Furthermore, Mexico's economy extended its decline as it
shrank more than expected in February, mainly driven by weakness
in the manufacturing and service sectors, the national
statistics agency INEGi said.
    The currency of Chile, the world's largest copper producer, 
 gained 0.8% after falling for three consecutive sessions
as copper prices soared to 10-year highs.
    Chilean President Sebastian Pinera on Sunday announced the
government will launch its own bill to allow citizens to draw
more from their private pensions as mining unions threatening to
protest if the government did not drop the
bid.
    At 1415 GMT, the greenback was stable after it
slumped to an almost eight-week low versus major peers amid
speculation that U.S. Federal Reserve Chairman Jerome Powell
will shun talk of tapering bond purchases at a policy meeting
this week.
    MSCI's index for Latin American currencies
gained 0.4%, while stocks jumped 0.8%. 

    Key Latin American stock indexes and currencies:
    
                              Latest      Daily % change
 MSCI Emerging Markets         1360.97                 0.59
                                        
 MSCI LatAm                    2435.15                 0.75
                                        
 Brazil Bovespa              120768.43                  0.2
                                        
 Mexico IPC                   49168.49                 0.16
                                        
 Chile IPSA                    4887.56                    1
                                        
 Argentina MerVal             47898.56                1.106
                                        
 Colombia COLCAP               1284.56                 0.18 Currencies             Latest      Daily % change
 Brazil real                    5.4540                 0.77
                                        
 Mexico peso                   19.8250                -0.05
                                        
 Chile peso                        706                 0.81
                                        
 Colombia peso                 3643.22                -0.45
 Peru sol                        3.787                 0.00
                                        
 Argentina peso                93.2700                -0.15
 (interbank)                            
                                        
 

 (Reporting by Shashank Nayar in Bengaluru; Editing by Angus
MacSwan)
  
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