Updates with afternoon levels

By Avinash P and Purvi Agarwal

May 28 (Reuters) - Most Latin American currencies pared earlier losses on Thursday as investors weighed reports of a potential breakthrough in U.S.-Iran talks aimed at ending the war, while regional stocks were mixed as domestic developments kept markets uneven.

Axios first reported that the U.S. and Iran were considering a 60-day truce, during which negotiations over Tehran's nuclear program would take place.

The proposal still requires approval from U.S. President Donald Trump, the report said. The development came a day after the two sides traded airstrikes.

Oil prices turned negative after the report, while the dollar index =USD slipped 0.3%.

"The bullish sentiment in LatAm has been there for some time now because of their heavy commodity exposure and metal mining leverage... much of it has already been priced in," said Lale Akoner, global market strategist at eToro.

"So, we don't see much upside momentum on the effects based on recent news about the U.S. and Iran possibly moving towards an agreement ... it is very volatile and changes on a day-to-day basis."

Mexico's peso MXN= appreciated 0.3%, while local stocks .MXX were down 1.6%.

Mexico and the United States began formal talks on the USMCA, the existing North American free-trade agreement, with Washington seeking a new standard to measure origin content for vehicles made in Mexico.

The Bank of Mexico lowered its 2026 economic growth forecast to 1.1% from 1.6%, warning that uncertainty tied to the negotiations could weigh on investment in the second half of the year.

Brazil's real BRL= rose 0.6%, while the Bovespa .BVSP was down 0.3%. The country's central bank will not allow higher inflation expectations to feed into actual inflation, monetary policy director Nilton David said, striking a hawkish tone.

Brazil's central government, meanwhile, posted a larger-than-expected primary surplus for April, Treasury data showed, as stronger revenue outweighed higher social security spending.

Colombia's peso COP= weakened 0.2%, while the country's COLCAP stock index .COLCAP also lost 0.3%.

Investors are awaiting the first round of Colombia's presidential election, scheduled for the weekend, with polls pointing to a tight race between leftist Ivan Cepeda and right-wing candidate Abelardo De La Espriella.

Cepeda has pledged to deepen the economic and social reforms of current President Gustavo Petro, while De La Espriella has proposed incentives for private investors and measures to boost the mining and energy sectors. Analysts expect more pro-growth policies if the right-wing candidate wins.

Chile's equities .SPIPSA gained 0.5%, partly tracking higher copper prices, while the peso CLP= appreciated 0.6%.

MSCI's index of Latin American currencies .MILA00000CUS reversed earlier losses to trade 0.6% higher, while the regional stocks gauge .MILA00000PUS was flat.

Markets also digested U.S. data showing inflation increased in April at its fastest pace in three years. Still, the figures did little to alter expectations that the Federal Reserve will ease monetary policy later this year.

"The U.S. data suggest the Fed is unlikely to make policy more restrictive anytime soon, and that should ease pressure on Latin American markets," said Andres Abadia, chief LatAm economist at Pantheon Macroeconomics.

Key Latin American stock indexes and currencies:

Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1727.8	-0.65
MSCI LatAm .MILA00000PUS	3061.74	-0.07
Brazil Bovespa .BVSP	175276.89	-0.27
Mexico IPC .MXX	68895.21	-1.61
Chile IPSA .SPIPSA	10889.35	0.46
Argentina MerVal .MERV	3077391.89	0.18
Colombia COLCAP .COLCAP	2187.2	-0.34
Currencies	Latest	Daily % change
Brazil real BRL=	5.0282	0.6
Mexico peso MXN=	17.3071	0.27
Chile peso CLP=	888.63	0.56
Colombia peso COP=	3633.5	-0.19
Peru sol PEN=	3.407	-0.07
Argentina peso (interbank) ARS=RASL	1,409.0	0.25
Argentina peso (parallel) ARSB=	1,410.0	2.08