(Updates with final prices, Mexican peso) SAO PAULO, April 18 (Reuters) - Yields paid on Brazilian interest rate futures fell on Tuesday after minutes of the central bank's last policy meeting showed officials considered a steeper rate cut, while Mexico's peso sagged following aggressive comments by Donald Trump on trade.
According to the minutes, weak economic activity in Brazil could allow for an acceleration of monetary easing, but lingering uncertainties make the present 100 basis-point pace more appropriate.
Rate future yields indicated a 13 percent probability that the central bank will cut the benchmark Selic rate by 125 basis points at its May meeting, traders said, compared to 8 percent on Monday. Still, investors mostly bet the bank will stick to 100 basis-point cuts.
Meanwhile, Mexico's peso erased earlier gains to close down by 0.6 percent against the dollar after U.S. President Trump said he would make some "very big changes" to NAFTA or ditch the agreement that underpins the bulk of North American trade.
Brazil's economic downturn unexpectedly deepened late last year, data showed, suggesting a slow recovery from the worst recession on record. That helped lower inflation rates to the central bank's 4.5 percent target, facilitating a steep rate-cutting cycle.
Still, uncertainties over the approval of structural reforms including revamping Brazil's costly pension system have put many investors on edge. A senior lawmaker said on Tuesday the Brazilian government has agreed to further water down the pension reform in order to secure its approval.
The Brazilian real fell 0.29 percent, while most Latin American currencies seesawed. Many traders kept to the sidelines amid tensions between the United States and North Korea, which have weighed on demand for riskier emerging market assets.
The Chilean peso weakened 0.4 percent, following copper prices lower.
Latin American stock indexes and currencies at 2200 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 957.70 -0.52 11.07 MSCI LatAm 2,654.17 0.12 13.39 Brazil Bovespa 64,158.84 -0.27 6.53 Mexico IPC 48,762.53 -0.51 6.83 Chile IPSA 4,837.87 -0.47 16.54 Chile IGPA 24,281.11 -0.39 17.11 Argentina MerVal 20,669.72 -0.37 22.18 Colombia IGBC 10,185.33 -0.06 0.57 Venezuela IBC 47,561.23 0.49 50.01 Currencies Latest Daily YTD pct pct change change Brazil real 3.1134 -0.29 4.36 Mexico peso 18.605 -0.59 10.31 Chile peso 648.5 -0.43 3.42 Colombia peso 2,839.5 0.39 5.71 Peru sol 3.25 0.00 5.05 Argentina peso (interbank) 15.2700 -0.64 3.96 Argentina peso (parallel) 15.82 0.25 6.32 (Reporting by Bruno Federowski; Editing by Grant McCool and Chris Reese)