EMERGING MARKETS-Latam FX hits two-week low before central bank meetings; Romania's leu touches record low

By Pranav Kashyap

May 6 (Reuters) - A gauge tracking Latin American currencies hit a two-week low on Tuesday, as the region gears up for a slew of central bank meetings, while Romania's currency hit a record low against the euro.

Romania's longer-dated euro bonds tumbled and the leu RONEUR=R dropped 2.2% to below 5 per euro, as hard-right eurosceptic George Simion decisively swept the ballot on Sunday, and now faces independent centrist Nicusor Dan in a May 18 runoff.

U.S. bank JPMorgan opted to go long on the euro against the Romanian leu in FX spot markets post-election. The bank noted that Simion's win increased the likelihood of a devaluation.

Yields on Romania's euro-dominated bonds due in 2038 and 2049 RO176807431=, RO196870687= were near one-month highs, while those maturing in 2050 RO210981314= hit the highest in 2-1/2 years.

In Latin America, currencies did not get the boost from the weaker dollar that supported Asian currencies, as attention shifted to a series of central bank meetings. A regional currency gauge .MILA00000CUS dropped 0.8%, hitting its lowest since late April.

Brazil's real BRL= slipped 0.5% after the services PMI revealed a decline to 48.9 in April. The nation's central bank is set to convene its monetary policy meeting, with expectations to raise interest rates to a peak unseen in nearly two decades on Wednesday.

Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, highlighted the real's weakness, suggesting that Brazil's central bank might adopt a less aggressive stance than before. The PMI data, alongside previous reports, indicate that inflation is relatively under control, he said.

The Mexican peso MXN= lost 0.4%, while its stock index .MXX gained 0.17%. The country's annual inflation rate likely ticked up in April but remained within the central bank's target, a Reuters poll showed. This supported expectations that the central bank will continue cutting its benchmark interest rate.

Banxico is poised to announce its monetary policy decision on May 15.

The dollar index =USD lost 0.4%.

In Colombia, the peso COP= slipped 0.2% while its benchmark index .COLCAP fell 0.29%.

The central bank raised its inflation forecast for the year to 4.4% from 4.1%, as outlined in its monetary policy report, after a surprise interest rate cut last Wednesday. Minutes from the rate-setting meeting are anticipated later in the day.

Argentina's peso ARS=RASL, currently flat, is projected to remain within a government-set band in the coming months, likely nearing the upper limit as October's mid-term elections approach, according to a Reuters poll.

This scenario suggests a 7.2% loss during the lead-up and aftermath of the legislative election, in which President Javier Milei's reform agenda will face a crucial test of public support.

Ratings agency Moody's sees inflation in Argentina at 30% by the end of this year, but may revise that figure downward.

Assets in Taiwan experienced a pullback, with its currency retreating slightly following a two-day surge against the U.S. dollar in previous trading sessions. The benchmark index concluded the day flat.

A wave of dollar selling has invigorated broader emerging market currencies, as investors begin to reassess the dollar's position as a safe-haven currency.

Ripples from Friday and Monday's unprecedented rally in the Taiwan dollar TWD=TP are now extending outward, catalyzing gains for currencies in Singapore SGD=, South Korea KRW=, Malaysia MYR=, China CNY=CFXS, and Hong Kong HKD=D3.

"The recent depreciation of the U.S. dollar against all currencies may prompt large holders of the greenback, "to convert some of their positions" or to "seek hedging protection against further dollar weakness," said Hasnain Malik, head of equity research at Tellimer, a research firm.

Traders noted that "carry trades" — borrowing low-yielding currencies such as the yuan to invest in higher-yielding U.S. assets — have lost their allure due to the dollar's recent decline.

Key Latin American stock indexes and currencies: