Latin American currencies mixed, Brazil's real at five-week low

Latin American currencies were mixed on Tuesday against a weak dollar, with the Brazilian real sliding to a five-week low as further evidence of slowing inflation exerted more pressure on the central bank to cut interest rates.

The real USDBRL, (BRBY) fell 0.6% against the dollar, dragging MSCI's Latin American currencies index (.MILA00000CUS) down 0.6%.

Data showed producer prices in Brazil fell 0.35% in April, following a recent reading on slowdown in consumer prices and easing inflation expectations in Latin America's largest economy.

The data comes amid intense pressure from President Luiz Inacio Lula da Silva on Brazil's central bank to cut rates.

"The faster inflation falls, the possibility of keeping really, really high real interest rates is only going to cause stress between the central bank and the government, which we've seen through periods of Q1. That doesn't bode well for investor confidence," said Simon Harvey, head of FX analysis at Monex Europe.

A separate central bank report showed outstanding loans in Brazil contracted by 0.1% in April compared with the previous month due to a decrease in corporate credit, while delinquency worsened.

Meanwhile, executive secretary of the Finance Ministry Gabriel Galipolo noted that Brazil's newly introduced fiscal framework is stricter than they appear and will require a discussion of important spending cuts.

The Chilean peso USDCLP, the currency of the world's biggest copper exporter, pared much of the gains and was only marginally higher, tracking the fall in prices of the red metal.

The Andean country's unemployment rate hit 8.7% in the February-April period, government statistics agency INE said, below market consensus.

Meanwhile, the Chilean Copper Commission (Cochilco) forecasted a "strong" lithium shortage and significant price hikes from 2031, alongside rising demand for the key metal. Chile is the world's second largest lithium producer.

The currency of Peru USDPEN, the second biggest copper producer, slipped 0.3%, while the Colombian peso USDCOP jumped nearly 1%. .

On the monetary policy front, Board Chief Leonardo Villar said Colombia's central bank could call time on its upward monetary cycle after inflation in Latin America's fourth-largest economy slowed in May.

Latin American currencies have outperformed their emerging market peers this year, largely on the back of attractive yield due to high interest rates, but many central banks in the region have halted their tightening cycles.

Concerns about weak economic recovery in China have also been at the forefront of investor concerns as many Latin American countries export commodities to the country.

Meanwhile, relief at a tentative agreement to raise the U.S. debt limit was outweighed by concerns that the deal could face a rocky path through Congress.

Latam stocks (.MILA00000PUS) slumped 1.9% and were set for their biggest single-day percentage loss in four weeks.

Elsewhere, Turkey's lira USDTRY slid to a fresh record low as President Tayyip Erdogan, having won Sunday's election runoff, was set for a high-stakes decision over whether to reset economic policy in a cabinet overhaul.

Key Latin American stock indexes and currencies 1910 GMT: