* Peru's sol up more than 4% this week * Chile's peso hit by political uncertainty * Brazil inflation outlook in doubt By Ambar Warrick Oct 15 (Reuters) - Chile's peso slumped to a 15-month low on Friday as political uncertainty weighed, while Brazil's real rose after the central bank said inflation would likely peak this month. Peru's sol was the biggest gainer in Latin America this week, set for its best week in more than 30 years as a more moderate turn by President Pedro Castillo boosted investor optimism. The sol, which is set to add more than 4% this week, has posted a six-day winning streak since Castillo named more moderate officials to his cabinet, calming fears over market-unfriendly policy reforms. Chile's peso fell as much as 0.8% to 831.9 to the dollar on Friday, its weakest since May 2020 after opposition lawmakers launched impeachment proceedings against President Sebastian Pinera over possible irregularities in the sale of a mining company. The controversy, sparked by new details on the deal in the Pandora Papers leak, comes ahead of presidential and legislative elections in November. A sharp interest rate hike by the central bank earlier this week gave the peso temporary relief, as inflation also heats up in the country, but it was set to end the week in the red. Most other Latin American currencies were muted on Friday. Brazil's real rose 0.7% after central bank international affairs and corporate risks director Fernanda Guardado said the bank sees 12-month inflation peaking between this month and last month before subsiding towards the official target. Guardado added that steeper interest rate hikes were not off the table but the bank was convinced that its current pace of 100 basis points at each policy meeting would bring inflation back to target next year. Analysts shared the central bank's view on inflation having peaked, but were skeptical over the short-term outlook. "Although inflation will likely ease in the coming months, we continue to expect an unfavourable outlook for H1/22. Against this backdrop, Banco Central will continue its tightening cycle, with rates reaching 9% in February 2022," analysts at TS Lombard wrote in a note. Rate hikes have somewhat helped the real through volatile market conditions bought about by concerns over inflation and stretched fiscal spending. Other Latin American economies have also been struggling with a spike in inflation, with rising oil prices adding to the pressure. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1281.86 1.2 MSCI LatAm 2268.97 1.01 Brazil Bovespa 113361.26 0.16 Mexico IPC 52283.81 0.28 Chile IPSA 4037.37 1.02 Argentina MerVal 0.00 0 Colombia COLCAP 1416.05 -0.04 Currencies Latest Daily % change Brazil real 5.4768 0.70 Mexico peso 20.5352 0.02 Chile peso 828.9 -0.40 Colombia peso 3772.53 -0.15 Peru sol 3.9094 0.22 Argentina peso 99.1800 -0.02 (interbank) (Reporting by Ambar Warrick; Editing by Kirsten Donovan)
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