UPDATE 1-Mexican peso near eight-year high, again breaks 17 per dollar barrier

(Adds background, analyst comment throughout)

MEXICO CITY, July 12 (Reuters) - The Mexican peso strengthened more than 1% against the U.S. dollar in early morning trading Wednesday, breaking through the psychological barrier of 17 pesos per dollar for the second time in a week to its strongest since early December 2015.

The currency, which has been dubbed the "super peso" in some quarters, including by its most prominent cheerleader, President Andres Manuel Lopez Obrador, firmed to 16.80 per greenback before paring back some of its gains.

The peso's gains come as the

dollar sank to a new two-month low

against a series of currencies after data showed the rise in U.S. consumer prices eased in June, suggesting that the Federal Reserve may raise interest rates one more time this year.

"The Mexican currency was favored by the accelerated decline in U.S. inflation," analysts at Mexican brokerage Monex said.

Mexico's peso briefly broke the 17 peso dollar barrier last week, but had lost some ground until Wednesday's gains.

Some analysts have warned that a prolonged peso run could eventually be

more harmful than beneficial

to Mexico's economy because it makes Mexican exports more expensive and deflates the value of remittances from U.S. senders. (Reporting by Anthony Esposito and Aida Pelaez-Fernandez; Writing by Kylie Madry)