EMERGING MARKETS-Mexican, Chilean pesos lag Latam FX on economic growth worries

* Chilean peso falls with lower copper prices * Mexico financial system stable, global risks weigh -central bank * Argentina central bank hikes interest rates by 300 bps (Updates prices, adds market strategist’s comment) By Shreyashi Sanyal and Bansari Mayur Kamdar June 16 (Reuters) – Currencies in both Mexico and Chile trimmed some early losses on Thursday, but still lagged peers in Latin America on worries about economic growth, taking cues from a global rout sparked by aggressive monetary tightening to tame sky-high inflation. The U.S. Federal Reserve raised rates by 75 basis points on Wednesday followed by two other spates of policy tightening in Britain and Switzerland on Thursday, rekindling investor fears that aggressive actions could drag economies into recession. The Mexican peso slid 0.6%, while stocks in the region slipped 1.5%. Mexico’s central bank chief said the country’s financial system is resilient but warned of risks due to remaining effects of the COVID-19 pandemic, repercussions from Russia’s invasion of Ukraine and global inflationary pressures. “It is primarily inflation concerns. Mexico only just avoided a technical recession at the end of last year,” said Christian Lawrence, senior market strategist at Rabobank. If there is less consumer spending, especially in the United States, “that does not bode well for Mexico overall”, Lawrence said. Shares in Mexican airlines fell sharply on concerns around rising fuel prices and inflation globally. Flagship carrier Aeromexico dropped 20.6% after resuming trading around midday following a temporary suspension triggered by a nearly 13% fall. Low-cost airline Volaris slid 14.8%. Aggressive monetary policy and stubborn inflation have hit developing world assets among other riskier assets. Latin American markets are also particularly sensitive to demand from China, which is tackling another surge in COVID-19 cases with strict lockdowns. Chile’s peso declined 0.9% in tandem with prices of copper, its top export. Chile’s government is set to push forward its tax reform plans, including a bill on mining royalties, by the end of this month, legislation that could impact the world’s top copper producer. Chile is also in the process of overhauling its market-orientated constitution which dates back decades to the military dictatorship of Augusto Pinochet. Investment in Chile’s mining sector could face gridlock if political uncertainty over a new constitution is not resolved, ratings agency Moody’s said on Wednesday. Colombia’s peso edged 0.2% up and the Peruvian sol gained 0.3% against the dollar. Argentina’s black market peso jumped 1.9% after the central bank sharply hiked the its benchmark interest rate as it battles soaring inflation, lifting the rate 300 basis points to 52%. Brazil’s central bank on Wednesday raised interest rates by 50 basis points, in line with prevailing market expectations, and signaled another increase coming. Brazilian markets were shut on Thursday on account of a public holiday. Latin American stock indexes and currencies at 1908 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1008.86 -1.1 MSCI LatAm 2155.15 0.47 Brazil Bovespa – – Mexico IPC 47609.72 -1.52 Chile IPSA 5004.61 -2.62 Argentina MerVal 87105.97 -1.537 Colombia COLCAP 1457.43 -0.42 Currencies Latest Daily % change Brazil real – – Mexico peso 20.3959 -0.74 Chile peso 865.5 -1.17 Colombia peso 3890.95 -0.19 Peru sol 3.7001 0.67 Argentina peso (interbank) 122.9100 -0.17 Argentina peso (parallel) 213 1.88 (Reporting by Shreyashi Sanyal and Bansari Mayur Kamdar in Bengaluru Editing by Alistair Bell and Grant McCool)