The Mexican economy shrinks more than expected Brazil's inflation hits its highest in almost 20 years Turkish lira is up 0.7%; Hungary's forint pulls away from its all-time lows on Thursday. Susan Mathew Nov 25 Reuters - Latin American currencies lagged emerging market peers on Thursday, with Mexico's peso falling due to shrinking economic growth while in Brazil's inflation near 20 year highs kept the currency from losses on speculation of large interest rate hikes. After a 1% slide on Wednesday on central bank leadership uncertainty, Mexico's peso extended losses to a sixth straight session, down 0.5%, to stay near eight-month lows. The Mexican economy shrank by 0.4% in the third quarter from the previous three month period, with a decline in service sector activity as a result of the seasonally adjusted data on Thursday. A Reuters poll had predicted a 0.3% contraction. The central bank is pressured to tighten policy after figures showed that annual inflation rose faster than expected to 7%, its highest in over a decade. Volumes were expected to be low, with the U.S. Treasury and stocks markets shut for Thanksgiving. Brazil's real was flat, faring better than regional peers as consumers' expectations of a large rate hike went up next month after consumer prices went up slightly more than expected. However, prices fell month-on-month. With the headline rate still above target and fiscal risks persisting, it appears more likely that the central bank will raise the Selic rate in a larger 175 bp step to 9.50% when it meets next month, said William Jackson, chief EM economist with Capital Economics. In October, the central bank had risen by 150 basis points, bringing increases this year to 575 basis points. Brazil attracted $2.49 billion in foreign direct investment in October, which is less than the $4 billion predicted by economists in a Reuters poll. State oil firm Petrobras raised more than 1% after a 5 year investment plan, a revised dividend policy, and a more flexible debt target linked to payments. Turkey's lira held its ground, up 0.7%, after central bank minutes reiterated it may cut rates in December, despite the fact that short-term inflation will be volatile. Turkey's central bank signed a memorandum of understanding with the central bank of the United Arab Emirates on Thursday to promote cooperation in the field of central banking. Hungary's forint was poised for its best session in four months, pulling away from all-time lows after the central bank raised its one-week deposit rate by 40 basis points to 2.9% as it fights rising inflation risks.