SAO PAULO, Aug 28 (Reuters) - The Mexican peso tumbled on Monday after U.S. President Donald Trump renewed his threat to scrap NAFTA, reigniting concerns of a damaging trade war. In a tweet days before Mexico, the United States and Canada were set to hold a second round of negotiations on the treaty, Trump said talks were "very difficult" and that he may have to terminate the trade deal. The tweet echoed similar remarks a week ago that drove a sharp selloff in the peso. The currency later pared some of those losses after Mexican and Canadian officials dismissed the threats as a negotiation tactic. On Monday, the peso slipped 1.1 percent to a one-week low. The country's benchmark stock index fell 0.5 percent. "A deal remains our base case but the peso may lag with higher uncertainty, after a period where Trump fear has been almost fully priced out by the markets," Citigroup strategists wrote in a client note. The Chilean peso strengthened 1 percent after breaching the 630 per greenback threshold for the first time in two years, tracking widespread dollar weakness. Emerging market currencies have advanced since Friday after Federal Reserve Chair Janet Yellen refrained from discussing monetary policy in a closely watched speech, moderating expectations the U.S. central bank will raise interest rates further this year. The dollar also weakened after Tropical Storm Harvey paralyzed Houston, Texas, the nation's fourth-biggest city, spurring worries about the storm's potential impact on the U.S. economy. Brazil's stocks and currency were nearly flat as traders awaited key votes in Congress, including a bill setting a wider budget deficit target for this year. Shares of JBS SA were the biggest gainers, extending advances for a second trading day after an anti-corruption division within the Brazilian prosecutor general's office approved a leniency deal with J&F Investimentos SA, the holding company that controls the world's largest meatpacker.
Key Latin American stock indexes and currencies at 1720 GMT:
Stock indexes Latest Daily YTD pct pct change
MSCI Emerging Markets 1,085.52 0.01 25.87 MSCI LatAm 2,875.00 -0.63 23.61 Brazil Bovespa 71,101.06 0.04 18.05 Mexico S&P/BVM IPC 51,092.01 -0.55 11.94 Chile IPSA 5,154.31 -0.42 24.16 Chile IGPA 25,740.56 -0.39 24.15 Argentina MerVal 23,501.68 0 38.92 Colombia IGBC 10,845.93 -0.47 7.09 Venezuela IBC 206,677.84 1.77 551.87 Currencies Latest Daily YTD pct pct change
Brazil real 3.1556 -0.07 2.97 Mexico peso 17.8155 -1.07 16.44 Chile peso 627.65 1.04 6.86 Colombia peso 2,942.17 -0.66 2.02 Peru sol 3.235 0.03 5.53 Argentina peso (interbank) 17.2250 -0.03 -7.84 Argentina peso (parallel) 18.26 0.11 -7.89
(Reporting by Bruno Federowski; Editing by Meredith Mazzilli)