*

IMF says emerging market capital inflows recover to 2018

levels

*

Fiscal expansion not good for Brazil at the moment, Haddad

says

*

Argentine inflation data up 4.6% m-o-m in June

*

Latam stocks up 0.9%, FX up 0.3%

(Updated at 3:45 p.m. EDT/ 1945 GMT)

By Johann M Cherian

July 12 (Reuters) - Most Latin American currencies

strengthened on Friday, with Peru's sol hitting its highest

level in a month after the central bank left borrowing costs

unchanged, while regional stocks were set for their biggest

weekly jump in seven months.

MSCI's index tracking regional currencies

gained 0.3% against the dollar, with investors firming bets of a

U.S. Federal Reserve rate cut in September.

The fall in the dollar also saw the Japanese yen

hit an almost four-week high, raising speculation of

authorities' intervention for a second day.

Peru's central bank held its benchmark interest rate steady

at 5.75% on Thursday for the second policy meeting in a row, as

expected, after annual inflation rose slightly to 2.29% last

month. The sol appreciated 0.9% on Friday.

"Inflation will remain within the target range and, together

with the incipient recovery of economic activity, (it) will give

the central bank room to implement additional cuts to the policy

rate in the coming months, although with some extra pauses,"

said Hugo Vega, senior economist at BBVA Research said.

Brazil's real edged 0.2% up as investors assessed

remarks by Finance Minister Fernando Haddad, who underlined that

fiscal expansion was not a good thing for the country.

Investor sentiment was rattled late last month, sending the

real down to over two-year lows, on concerns around high fiscal

deficits and central bank independence in the region's biggest

economy.

Meanwhile, the International Monetary Fund said that gross

capital inflows into emerging markets excluding China last year

rose to $110 billion or 0.6% of their economic output, the

highest level since 2018.

Oil exporters Mexico's peso and Colombia's peso

firmed 0.8% and 1.3%, respectively.

The Mexican currency is set for its second straight week of

gains, up over 1.5%, supported by the highest interest rate for

any of the more popularly traded free-floating currencies,

offering better returns than the dollar.

The Argentine peso weakened 1% to 1,480 per dollar

in the parallel black market. Data showed Argentine inflation

rate stood at 4.6% in June, speeding up from May's rate of 4.2%

and breaking a five-month streak of slowdown.

The world's largest copper producer Chile's peso

jumped nearly 1%, and was poised for its biggest weekly gain of

2.5% in two months as prices of the metal ticked higher.

On the equities side, MSCI's index tracking regional bourses

advanced 0.9%, with Brazil's Bovespa

adding 0.5%.

The MSCI equities index is up 3.6% for the week and is on

track for its biggest weekly jump in over eight months.

Key Latin American stock indexes and currencies at 1437 GMT:

Latin American market prices from

Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1124.73 -0.01

MSCI LatAm 2333.83 0.9

Brazil Bovespa 128941.60 0.51

Mexico IPC 54913.79 0.9

Chile IPSA 6546.63 0.03

Argentina MerVal 1715182.70 0.557

Colombia COLCAP 1370.30 -0.44

Currencies Latest Daily %

change

Brazil real 5.4307 0.20

Mexico peso 17.6268 0.79

Chile peso 905.4 0.97

Colombia peso 3925.24 1.26

Peru sol 3.7129 0.89

Argentina peso (interbank) 919.0000 0.05

Argentina peso (parallel) 1480 -1.01