(Recasts, updates prices) MEXICO CITY, Feb 9 (Reuters) - Mexico's peso strengthened on Thursday, after the country's central bank raised its benchmark interest rate in a bid to fend off quickening inflation after a spike in gasoline prices added to pressure from a weak currency. The peso gained more than 0.5 percent after the central bank raised its key rate by 50 basis points to 6.25 percent, the highest level since March 2009 and in line with expectations in a Reuters poll. But policymakers suggested further rate hikes were possible if higher gasoline prices and a weaker peso push up the costs of other goods and services. "The central bank is reacting the way it should," said Gustavo Rangel, chief economist for Latin America at ING in New York. "The positive thing (for the peso) for Banxico to do would be to more aggressive than the market expects. The negative risk would be to do less." Rangel also said the market has underestimated how much inflation could rise in Mexico and expected the central bank to continue raising rates to 7.50 percent by year-end. Yields on interest rate swaps are pointing to bets that Mexico's benchmark rate will end 2017 around 7 percent. Elsewhere, the initial public offering for Mexico's Jose Cuervo raised more than $900 million in the country's first IPO since November, boosting the local stock exchange. Shares in Cuervo priced at 34 pesos ($1.67), and jumped more than 8 percent after the market opened before paring gains to close up 4.2 percent at 35.43 pesos. Shares of Mexican cement producer Cemex were a leading gainer on the benchmark IPC index, after the company beat analysts' expectations with a reported 48-percent jump in fourth-quarter net profit. The index closed 0.6 percent higher on Thursday. Key Latin American stock indexes and currencies at 2230 GMT: Stock indexes Latest Daily pct YTD pct change change MSCI Emerging Markets 925.57 0.42 7.34 MSCI LatAm 2,555.77 0.41 9.19 Brazil Bovespa 64,964.89 0.2 7.87 Mexico IPC 47,232.17 0.66 3.48 Chile IPSA 4,296.15 0.68 3.49 Chile IGPA 21,420.26 0.6 3.31 Argentina MerVal 19,302.25 0.8 14.09 Colombia IGBC 10,029.68 -0.29 -0.97 Venezuela IBC 27,733.47 -1.91 -12.53 Currencies Latest Daily pct YTD pct change change Brazil real 3.1284 -0.304 3.86 Mexico peso 20.3500 0.627 1.94 Chile peso 645.4 0.00 3.92 Colombia peso 2,858.3 0.00 5.01 Peru sol 3.267 0.00 4.50 (Reporting by Natalie Schachar and Michael O'Boyle, editing by G Crosse)
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