*

Peru rate decision awaited

*

Mexican inflation maintains downtrend

*

Colombia inflation data on tap

*

Stocks down 0.3%, FX up 0.1%

(Updated at 3:15 pm ET/2015GMT)

By Shashwat Chauhan and Lisa Pauline Mattackal

March 7 (Reuters) - Most Latin American currencies

reversed early losses on Thursday, rising against a weaker

dollar while Peru's sol gained ahead of a likely local rate cut.

MSCI's index for Latin American currencies

recovered from setbacks in early trading to edge

0.1% higher as the dollar index lost 0.5%.

Federal Reserve chief

Jerome Powell

said in Congressional testimony the Fed is "not far from"

having enough confidence to start cutting interest rates.

Peru's sol jumped 0.6% and was trading around its

highest since Jan. 16 ahead of an expected 25 basis point rate

cut from the central bank.

"We believe that the central bank remains comfortable

with the overall dynamics of the disinflation process, inflation

momentum is still contained ... and the (sol) appreciated by 2%

since the last MPC meeting, arresting the weak trajectory on

which it was set in 2024," analysts at Goldman Sachs wrote on

Thursday.

The Mexican peso turned 0.1% higher, paring initial

losses after official data showed headline inflation eased more

than expected in February, which strengthened the case for

continued rate cuts.

"The increase was the smallest for a February since 2021,

highlighting that the underlying picture is still improving

consistently, easing the pressures on Banxico," said Andres

Abadia, chief LatAm economist at Pantheon Macroeconomics.

Colombia's peso gained 0.1% ahead of the release of

February consumer prices data, with year-on-year inflation

expected to ease to 7.6%.

Iron ore exporter Brazil's real advanced 0.2%

amid rising prices of the metal, while Chile's peso was

on track to snap a three-day losing streak as copper

strengthened.

Ecuador's

international dollar bonds rose, with the 2040

and 2035 both up 2 cents

after the International Monetary Fund said the country requested

discussions on a new program.

MSCI's basket of Latin American stocks

dipped 0.3%. Heavyweight Brazilian shares lost 0.5% as

financial and energy stocks lost ground.

Itao Unibanco fell 1.4% and shares of oil

giant Petrobras dipped 0.8%.

CSN Mineracao, the mining subsidiary of Brazilian

steelmaker and mining group CSN, rose 1% after CSN reported a

more than fourfold jump in fourth quarter profit. CSN shares

however, lost 4.6% in afternoon trading.

Egypt's pound

, EGP=> steadied near Wednesday's closing level at just

under 49.5 to the dollar, after plummeting on Wednesday once the

central bank announced a shift to a more flexible exchange rate

as Egypt secured an expanded $8 billion IMF program.

HIGHLIGHTS

** Moody's raises outlook of Mexican banking system

**

Argentina state oil firm YPF

to invest $3 bln in shale in 2024

Key Latin American stock indexes and currencies at 2015 GMT:

Latest Daily %

change

MSCI Emerging Markets 1031.52 0.35

MSCI LatAm 2522.90 -0.3

Brazil Bovespa 128236.97 -0.51

Mexico IPC 55084.01 -0.36

Chile IPSA 6357.56 0.15

Argentina MerVal 994808.36 -0.484

Colombia COLCAP 1311.95 0.37

Currencies Latest Daily %

change

Brazil real 4.9332 -0.01

Mexico peso 16.8633 0.08

Chile peso 982.3 0.20

Colombia peso 3914.38 0.13

Peru sol 3.6986 0.61

Argentina peso 846.0000 0.00

(interbank)

Argentina peso 965 2.59

(parallel)