Mexico peso sinks on reserve comments, Greece woes

* Peso breaks five-week winning streak

* Finmin's comments on reserve accumulation weigh

* Cenbank holds rates steady as expected (Adds comments and background)

MEXICO CITY, March 19 (Reuters) - Mexico's peso broke a five-week winning streak on Friday after comments from the finance minister stoked speculation that the central bank will step up dollar purchases.

The peso MXN=MEX01 was on track to notch a 0.29 percent decline this week after sharp losses in the last two sessions dragged the currency back from a 17-month high.

The peso lost 0.51 percent to 12.582 per U.S. dollar on Friday. The IPC stock index .MXX closed up 0.16 percent at 33,022.80 in volatile trading as Wal-Mart de Mexico added 0.68 percent to 62.32 pesos.

Emerging market currencies slipped as investors fretted whether Greece will secure euro-zone aid to tackle its debt crisis ahead of a summit with EU leaders next week.

Risky assets such as emerging market currencies would be the mostly likely to suffer if Greece's debt problems tip off a larger financial crisis.

"Greece is the fundamental thing today," said Luis Flores, an economist at IXE brokerage in Mexico City. "But without a doubt there is a hangover from the comments by the finance minister," he added.

On Thursday, Mexican Finance Minister Ernesto Cordero told Reuters the government wanted to accumulate as much foreign reserves as possible before the United States starts raising interest rates. For details see [ID:nN18246645].

The comments fed mounting speculation Mexico could increase the amount of dollar options it began selling this year.

"The larger the dollar purchase increase, the bigger the pullback the peso may experience," wrote Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York.

RATES STEADY

The peso's losses in the last two sessions cut into a 6 percent surge from a Feb. 5 low amid signs of a rebound in Mexican exports.

But some analysts said the finance ministry and central bank-led foreign exchange commission is unlikely to move quickly on increasing the amount of dollar options it sells.

"We think the commission would want to avoid being perceived as signaling a given desired level for the currency," wrote Barclays Capital analyst Jimena Zuniga in a report.

The stronger peso is making exports less competitive and whittling away at the peso profits from oil exports by state-run Pemex, which funds around one-third of government spending.

Even if uncomfortable, the government has been wary of signaling concerns about specific currency levels since it floated the peso during a devastating crisis in the 1990s.

Mexico's central bank left its benchmark rate steady at 4.50 percent on Friday, but the bank warned that Mexico's march back from recession was increasingly allowing higher taxes and government-set prices to fuel inflation. [ID:nN19145237]

The yield on the government's benchmark 10-year peso bond MX10YT=RR bid up 3 basis points to 7.74 percent. (Reporting by Michael O'Boyle and Jean Luis Arce, Editing by Chizu Nomiyama)