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By Susan Mathew May 28 (Reuters) - Most Latin American stocks and currencies weakened on Tuesday amid the broader theme of lingering U.S-China trade tensions, while Brazil markets outperformed on reform hopes.
Mexico's peso fell 0.3%, while Chile's currency dropped 0.7% to its lowest since the first quarter of 2016, as the dollar strengthened.
The Peruvian sol also fell 0.2% against a stronger dollar, while the Brazilian and Colombian currencies eked out gains.
"It's not a pure Latam story today. It's about watching the dollar's move," said Christian Lawrence, senior market strategist at Rabobank. "I tend to think I would be a seller of most EM currencies this week." The dollar index, which measure the greenback against a basket of six peers, was up 0.2% with trade tensions and weakness in the euro on Italian budget worries buoying the U.S. currency.
Most stock in Latin America slipped, with Colombian stocks down more than a percent to a more than three-month low. State oil firm Ecopetrol slid 4.2% with oil prices trading mixed.
Mexican shares looked set to stretch losses to a sixth straight session.
Brazil stocks touched a 2/1-2 week high, extending gains from Monday when they rose after a march over the weekend by supporters of President Jair Bolsonaro added pressure on Congress to pass reforms, such as those on the pension system, seen as essential to the economy.
"Sunday demonstrations in support of the government have helped bring a more optimistic climate to the market," said Régis Chinchilla, an analyst with Terra Investiments.
Banks led the rally, while petrochemicals producer Braskem SA was among the top gainers after its board approved an agreement with authorities to pay 410 million reais to settle its involvement in the 'Car Wash' corruption case.
Key Latin American stock indexes and currencies at 1444 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 988.80 -0.04 MSCI LatAm 2610.63 0.08 Brazil Bovespa 95417.90 0.58 Mexico IPC 42419.39 -0.17 Chile IPSA 4851.23 0.02 Argentina MerVal 35413.66 -0.1 Colombia IGBC 11913.67 -1.15 Currencies Latest Daily % change Brazil real 4.0209 0.35 Mexico peso 19.1303 -0.40 Chile peso 703.4 -0.70 Colombia peso 3351.82 0.17 Peru sol 3.353 -0.03 Argentina peso 44.7800 0.49 (interbank) (Reporting by Susan Mathew in Bengaluru and Stefani Inouye in Sao Paulo; Editing by Nick Zieminski)