* US June CPI up modestly; core inflation slows * Brazil May services activity up more than expected * Mexico May industrial production up 1% vs April * Latam FX jumps 1.6%, stocks add 2.5% By Ankika Biswas July 12 (Reuters) - The index for Latin American currencies touched a ten-year high on Wednesday, led by Brazil's real, as the dollar dwindled after a U.S. inflation reading indicated just one more rate hike by the Federal Reserve this year. The MSCI index for Latam currencies jumped 1.6%, hitting its highest level since April 2013. The dollar sank to a fresh two-month low after U.S. consumer prices rose modestly in June and registered their smallest annual increase in over two years. Although talks of rate cuts have intensified in Latam of late, bets on the U.S. rate-hiking cycle coming to an end will likely lead to a favorable interest rates differential. The Brazilian real gained 1.3%, touching a one-week high. The rapporteur for Brazil's tax reform bill in the Senate, Eduardo Braga, on Tuesday said that he expects the proposal to be voted on in October in the House. "We see the piece of legislation approved in the Lower House having significant improvements in simplifying the tax system in addition to making the tax collection more efficient, and having favorable impacts on reducing the distortions in the tax system, and consequently on potential GDP," Citi analysts said. Data showed Brazil's services activity grew by much more than expected in May, paring some losses seen in April despite high interest rates. Goldman Sachs analysts expect the industry to benefit from significant fiscal stimulus, expanding real labor income, receding inflation and robust farming income. The Mexican peso jumped 1.3%, breaking below the psychological barrier of 17 pesos per dollar for the second time in a week. Mexican industrial output rose by 1% in May from April and was 3.9% higher year-over-year, much higher than expected, data showed. Higher crude oil prices also boosted the Mexican peso and top exporter Colombia's peso by 1.1%. World's largest copper producer Chile's peso and Peru's sol rose 0.9% and 0.6%, respectively, tracking higher prices of the red metal. Peru's interest rate decision is due on Thursday. Meanwhile, Argentine polling firms warned of difficulties accurately predicting the upcoming presidential primaries' results due to low turnout and the emergence of surprise candidates, leaving the October election also uncertain. The MSCI index for Latam stocks jumped 2.5%, touching a one-week high, led by a 1.4% advance Brazil's Bovespa . World's largest meat packer JBS SA jumped 9% after proposing a New York listing. Key Latin American stock indexes and currencies at 1447 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1007.16 1.23 MSCI LatAm 2483.41 2.45 Brazil Bovespa 118832.76 1.38 Mexico IPC 54162.14 0.04 Chile IPSA 6045.05 0.81 Argentina MerVal 0.00 0 Colombia COLCAP 1150.34 0.22 Currencies Latest Daily % change Brazil real 4.7973 1.32 Mexico peso 16.8260 1.26 Chile peso 809.2 0.87 Colombia peso 4124.9 1.13 Peru sol 3.5897 0.57 Argentina peso (interbank) 263.9000 -0.23 Argentina peso (parallel) 493 1.01 (Reporting by Ankika Biswas in Bengaluru, editing by Deepa Babington)
