* Colombia central bank likely to hold interest rates steady * Peru's Castillo wants to keep central bank head * Mexico's Salinas says his Banco Azteca may embrace bitcoin By Susan Mathew June 28 (Reuters) - Colombia's peso looked set for its best day in three weeks ahead of a central bank meeting on Monday, while Peru's sol strengthened for the first time in two weeks on hopes of central bank stability. The Colombian peso was up 0.8%, with the central bank expected to keep its benchmark interest rate unchanged at a record low of 1.75% for the ninth consecutive month. Though no surprises are expected, analysts will be on the lookout for details in the bank's statement which could signal the start of a monetary policy tightening cycle amid improvements in Latin America's fourth-largest economy. The central banks of Brazil and Mexico, the two biggest economies in Latin America, recently raised interest rates and signaled more rate hikes were on the way as they attempt to stem rising inflation. Chile's central bank also mulled hikes in its June meeting, minutes showed. "Colombia may soon join this club," said Nikhil Sanghani, an emerging markets economist with Capital Economics. "While the region appears to be on the brink of a broader tightening cycle, in general we think that the upward revision to investors' rate expectations has gone too far," he warned. Peru's sol strengthened 0.3% after socialist presidential candidate Pedro Castillo assuaged some market fears over the weekend when he said he would keep on the head of the central bank if he was confirmed the winner of a June 6 election. The sol has lost 9% since Castillo won the first round vote in April as investors fear sweeping reforms in the mining industry in the world's second-biggest producer of copper. Most other currencies made small moves on Monday. The dollar traded little changed, awaiting U.S. payrolls data later in the week. Brazil's real fell 0.2%. The Brazilian central bank's weekly survey showed a 12th consecutive weekly rise in inflation forecasts for this year to 5.97%, more than two percentage points above the bank's year-end goal of 3.75%. Meanwhile, Brazil is making progress on studies into launching a digital currency, but there are several challenges to overcome, including technology and the difficulty in ensuring uniformity across the world, central bank chief Roberto Campos Neto said on Friday. In Mexico, billionaire Ricardo Salinas Pliego said his banking business, Banco Azteca, may begin using bitcoin, which would make it the country's first bank to start accepting the cryptocurrency. Key Latin American stock indexes and currencies at 1415 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1380.63 0.08 MSCI LatAm 2651.27 -0.49 Brazil Bovespa 127429.28 0.14 Mexico IPC 50370.80 -0.35 Chile IPSA 4349.51 -1.62 Argentina MerVal - - Colombia COLCAP 1273.36 -0.84 Currencies Latest Daily % change Brazil real 4.9450 -0.19 Mexico peso 19.8350 -0.13 Chile peso 733.7 0.00 Colombia peso 3713.78 0.76 Peru sol 3.967 0.32 Argentina peso 95.6700 -0.06 (interbank) (Reporting by Susan Mathew in Bengaluru Editing by Paul Simao)
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