EMERGING MARKETS-LatAm FX touch intraday high as investors assess US, regional data; Chile's peso steady

By Pranav Kashyap and Twesha Dikshit

Sept 10 (Reuters) - Index tracking Latin American currencies traded at record levels on Wednesday, with the Brazilian real leading gains after a favorable inflation print, while Chile's peso advanced following an expected "hold" rate decision by the central bank.

A gauge linked to local currencies .MILA00000CUS touched a new peak and was last up 0.3%, while a parallel index tracking regional stocks .MILA00000PUS rose 0.37%.

The U.S. dollar =USD remained under pressure after a surprise fall in August producer prices solidified expectations for a Federal Reserve interest rate cut later this month.

In Brazil, the local real BRL= jumped 0.61% after consumer prices in Latin America's largest economy fell 0.11% in August, slightly below estimates. The decline in inflation may be linked to increased domestic product supply stemming from U.S. tariffs on Brazilian goods.

The key data arrives a week before the central bank's policy meeting. The bank kept rates steady at 15% in July - near a 20-year peak - pausing an aggressive 450-basis-point tightening cycle that began in September.

Steep borrowing costs aimed at taming inflation have started to crack the domestic economy, prompting traders to price in rate reductions by year-end.

"With inflation likely to end the year slightly below its current level and GDP growth set to slow further, we think the conditions will be in place for the start of an easing cycle around the turn of the year," said Liam Peach, senior Emerging Markets economist at Capital Economics.

Markets also tracked former President Jair Bolsonaro's case after Supreme Court Justice Luiz Fux urged annulling the proceedings.

In Chile, the central bank left its benchmark rate unchanged at 4.75% in a unanimous decision, matching expectations, while warning that stickier-than-expected core inflation warrants close monitoring of the economy.

Stocks in Santiago .SPIPSA dipped 0.12, while the peso CLP= rose 0.58%. Separately, Chile's central bank nudged its 2025 GDP projection to 2.25% to 2.75%, lifting the lower end from 2.0%.

Argentina stocks .MERV staged a comeback after a rout earlier this week, surging nearly 5% on Wednesday. The peso ARS=RASL, however, remained afflicted by political uncertainty, falling 0.5% and extending its weekly slump to 4.3% so far.

The country's assets collapsed after a crushing defeat for President Javier Milei's party in Sunday's Buenos Aires provincial election at the hands of the center-left Peronists, raising doubts about whether the libertarian president could advance his austerity policies.

The bigger scale of loss is also seen by markets as an indicator for October's midterm elections, leading investors to second‑guess domestic assets. Argentina's monthly inflation rate held steady at 1.9% in August, slightly below analysts' forecast of 2.0%.

Mexico will raise tariffs on automobiles from China and other Asian countries to 50% in a major overhaul aimed at protecting jobs, which analysts say is also meant to placate the United States.

Mexico peso MXN= was up 0.2%, while stocks .MXX fell about 0.4%.

The Peruvian sol PEN= added 0.3% in light volumes ahead of its central bank rate decision on Thursday, with markets expecting a 25-basis-point cut.

The Colombian peso COP= traded with caution, while stocks .COLCAP rose 0.3% after the government launched a tender offer for its outstanding 3.875% 2026 global bonds.

Key Latin American stock indexes and currencies: