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EMERGING MARKETS-Mexico peso, stocks drop after finance minister quits

By Agamoni Ghosh

(New throughout, updates prices, market activity and comments) By Agamoni Ghosh July 9 (Reuters) - Mexico's peso and stock market fell on Tuesday after Finance Minister Carlos Urzua quit abruptly with a scathing resignation letter, while trading volumes for the rest of region were muted, with markets closed in Brazil and Argentina. The peso tumbled over 2% on the news and the benchmark Mexican IPC stock index slid almost 1.5%. Both pared losses after President Andres Manuel Lopez Obrador appointed deputy finance minister Arturo Herrera to replace him. Urzua resigned and posted a scathing letter on Twitter that said some policy decisions were made without "sufficient foundation." Goldman Sachs in a note to investors called the resignation "an unexpected and negative development." The Obrador administration had hoped the U.S.-trained economist would help it sell its reform agenda to skeptical international investors. Urzua had deep differences over economic issues with Obrador, whose policy decisions have been questioned by investors since cancellation of a major airport project. "The fiscal situation in Mexico has been the main concern for a while now and given the reaction don't think the move is over yet for the peso," said Christian Lawrence, senior market strategist, Latam FX, Rabobank. "We should see repercussions of this for the next few days and the tone is likely to be more negative than positive." Other currencies were more or less subdued with the Chile's peso shedding about 0.3% as prices of copper, the country's top export, fell to a three-week low. Colombia's peso was little changed. Investors will now focus on Fed chief Jerome Powell's testimony to the Congress and release of minutes on Wednesday from the U.S. central bank's last policy meeting. Emerging markets have enjoyed capital inflows this year on signs major central banks would embrace a looser monetary policy as a result of trade disputes and growth concerns. However, strong U.S. jobs data on Friday hit expectations of a bold interest rate cut from the Fed's meeting this month, leaving investors in search of hints on where rates are headed. Key Latin American stock indexes and currencies at 1900 GMT Stock indexes Latest Daily % change MSCI Emerging Markets 1,042.05 -0.4 MSCI LatAm 2,917.38 -0.48 Brazil Bovespa - - Mexico IPC 42,921.50 -1.53 Chile IPSA 5,040.10 -0.52 Argentina MerVal - - Colombia IGBC 12,852.99 0.04 Currencies Latest Daily % change Brazil real - - Mexico peso 19.1208 -1.08 Chile peso 689.2 -0.36 Colombia peso 3216.4 -0.08 Peru sol 3.296 -0.33 (Reporting by Agamoni Ghosh and Sruthi Shankar in Bengaluru; Editing by David Gregorio)