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EMERGING MARKETS-Brazil, Mexico currencies firm on U.S. rate cut prospects

June 12 (Reuters) - The currencies of Brazil and Mexico firmed on Wednesday, benefiting from prospects that the Federal Reserve will cut interest rates soon after data showed that U.S. inflation barely rose in May. The greenback held steady after a brief dip on the data. Emerging market currencies tend to firm on expectations of Fed interest rate cut as a higher borrowing cost environment tends to divert money out of riskier assets. A steady move higher in U.S. interest rates last year saw outflows in emerging markets that contributed to currency crises in Argentina and Turkey among others. Brazil's real climbed 0.4% with hopes of pension reform passage, seen as crucial to get the economy back on track, lifting sentiment toward the currency. "We remain optimistic passage and stay bullish BRL," analysts at Citigroup said in a note. Mexico's peso was rose marginally, looking set to extend gains to a fourth day. The currency has made up most of the losses incurred after U.S. President Donald Trump's surprise threat late last month to impose tariffs on Mexican imports. Most other regional currencies weakened though, with lower oil prices contributing to a 0.5% fall in crude exporting Colombia's peso, the first decline in five days. Chile's peso also ticked lower as prices of copper - the country's main export - fell. Overall, emerging markets remained under pressure after Trump said he would hold up a trade deal with China unless it agreed to four or five major points. Going into the G20 summit this month, some profit taking among emerging markets currencies could be expected, analysts at Citigroup said a note. Trump has said he is ready to impose another round of tariffs in Chinese goods if no progress is made in trade talks with Chinese President Xi Jinping at the summit. Among stocks, Brazil's Bovespa fell 0.2% after hitting 12-week highs in early trade as iron ore and oil majors on the index were hit by falling prices of crude and the steel-making ingredient. Grupo Pão de Açucar (GPA), the controlling shareholder of Brazil's home appliances and furniture retailer Via Varejo, was among top gainers, up 1.4% gain. GPA said its board of directors approved the sale of all shares it owns in Via Varejo for a minimum price of 4.75 reais each. Via Varejo shares slid 4.4%. Key Latin American stock indexes and currencies at 1426 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1026.44 -0.52 MSCI LatAm 2806.57 0.55 Brazil Bovespa 98727.64 -0.23 Mexico IPC 43771.14 0.13 Chile IPSA 5076.93 0.15 Argentina MerVal - - Colombia IGBC 12260.51 -0.5 Currencies Latest Daily % change Brazil real 3.8320 0.43 Mexico peso 19.1170 0.04 Chile peso 694.2 -0.22 Colombia peso 3261.1 -0.19 Peru sol 3.33 -0.12 Argentina peso - - (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Susan Thomas)