EMERGING MARKETS-Brazil real, stocks lead Latin America market gains

By Susan Mathew June 14 (Reuters) - Brazil's real rose 0.8% on Monday against the dollar, leading Latin American currencies higher on expectations of a 75 basis-point interest rate this week and data showing Latin America's biggest economy had surpassed pre-pandemic levels. The currency reversed some of last Friday's steep 1.2% declines, after a central bank index showed Brazil's economic activity had risen above pre-pandemic levels in April. A survey by the central bank also showed forecasts for 2021 growth, inflation and interest rates hitting new highs. With inflation at 8%, well over the targeted 3.75%, the bank is expected to hike its key rate on Wednesday to 4.25%. "The central bank will see the better fiscal indicators and the currency appreciation offsetting the deterioration of current inflation, inflation expectations, and the faster closing of the output gap," Credit Suisse analysts told clients. Policymakers would continue to favour "partial normalization" of interest rates, they predicted. The real was among the worst performing emerging market currencies last year but is up over 2% so far in 2021. It rose 0.9% on the day against the dollar. The other big story in Latin America is Peru where vote counting for presidential elections is drawing to a close. Socialist Pedro Castillo holds a slight lead, though right-wing rival Keiko Fujimori is contesting several ballots. The sol is down about 7.5% since Castillo's surprise win in the first-round vote in April. Mexico's peso erased early gains to fall 0.2%, while Colombia's peso inched up. Emerging market currencies are generally benefiting from a calm dollar as well as reduced volatility which is a green light for carry trades. The Federal Reserve's policy decision this week is unlikely to show the U.S central bank plans to start unwinding stimulus in the very near-term. The dollar slipped after a strong rebound late last week, while MSCI index of EM currencies was on course for its worst session since April. Among stocks, Brazil's Bovespa index moved closer to all-time highs, with oil major Petrobras rallying after it said its Chinese partners in the Buzios pre-salt oil field would have to pay $2.94 billion for its prior investment there. Key Latin American stock indexes and currencies at 1438 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1382.16 0.01 MSCI LatAm 2676.64 1.16 Brazil Bovespa 130771.93 1.03 Mexico IPC 51135.91 -0.29 Chile IPSA 4349.48 0.9 Argentina MerVal 67125.34 1.56 Colombia COLCAP 1261.61 0.11 Currencies Latest Daily % change Brazil real 5.0727 0.92 Mexico peso 19.9222 -0.22 Chile peso 720.1 0.37 Colombia peso 3647.9 0.12 Peru sol 3.89 -0.01 Argentina peso 95.2500 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Marguerita Choy)