June 26 (Reuters) - Most Latin American currencies rose on Wednesday as optimism over U.S.-China trade talks offset weakness after the U.S. Federal Reserve dampened hopes of aggressive interest rate cuts. U.S. Treasury Secretary Steven Mnuchin said on Wednesday that the United States and China were close to a trade deal, CNBC reported ahead of meeting this week between presidents Donald Trump and Xi Jinping at the G20 Summit. The news turned around weakness in Latin American assets after comments from Fed policymakers on Tuesday pushed investors to trim expectations of a half-point cut in interest rates in a policy meeting next month. Emerging markets have rallied this month on signals from major central banks of monetary policy easing in the wake of global growth slowdown. Investors are now pinning their hopes on a de-escalation in the U.S.-China trade dispute. "While markets are priced for no further escalation in tariffs in the short-term, a G20 outcome that indicates progress on key issues and further talks would be positive," Morgan Stanley strategists wrote in a client note. "Whether that de-escalation is ultimately realized later in the year would be a question for later and the initial market reaction would be positive, and we'd expect to see a further rally for EM assets, particularly currencies." The Brazilian real steadied after two days of declines, with investors focused on the passage of the country's pension reform bill, which is expected to go through a vote in the congressional committee as soon as Thursday. Presidential spokesman Otavio Rego Barros said on Tuesday the lower house of Congress would vote on the reform before lawmakers break for recess on July 18. The Mexican peso was on track to snap a three-day run of declines, while the Colombian and the Chilean pesos climbed against the dollar. The Bovespa stock index climbed about 0.3%, led by gains for Brazil's largest fuel distribution company BR Distribuidora. However, bank shares provided the biggest boost to the main index. Latin American stock indexes and currencies at 1403 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1047.19 0.18 MSCI LatAm 2836.85 -0.11 Brazil Bovespa 100411.73 0.32 Mexico IPC 43829.40 0.09 Chile IPSA - - Argentina MerVal - - Colombia IGBC 12674.34 0.18 Currencies daily % change Latest Brazil real 3.8503 0.02 Mexico peso 19.1680 0.27 Chile peso 680.4 0.06 Colombia peso 3173.8 0.38 Peru sol - - Argentina peso 42.5700 -0.40 (interbank) (Reporting by Sruthi Shankar in Bengaluru Editing by Alistair Bell)
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