EMERGING MARKETS-Brazil's real, Mexico's peso slip on euro woes

* German court weighs new euro-zone bailout funds
* Mexican election results, drag on peso
* Brazil's real off 0.4 pct, Mexico's peso slips 0.2 pct

By Rachel Uranga
MEXICO CITY, July 10 (Reuters) - Brazil's real and the
Mexico's peso slipped on Tuesday against the dollar with
investors nervous that a German constitutional court could delay
Europe's new bailout funds, sparking concern that the region's
debt crisis could worsen.
Market players were on edge after the top court said it
would consider whether the euro zone's fund, known as the
European Stability Mechanism, and changes to its budget rules
comply with the country's laws.
Brazil's real declined 0.4 percent to 2.0362, while
Mexico's peso shed 0.2 percent to bid at 13.3665
against the dollar.
"People are waiting for this German court ruling, but nobody
knows how long it will be," said Win Thin, an emerging market
strategist at Brown Brothers Harriman.
Early in the session, the Mexico peso posted modest gains,
bolstered by early optimism after euro-zone ministers agreed to
release bailout funds to Spain's troubled banks. Further gains
could be short lived.
"If this euro zone gets worse, as I expect, it's going to be
hard for the peso to keep outperforming," Thin added. "It really
takes it on the chin when the markets start to blow up."
The currency, one of the most liquid in emerging markets,
has been trading in a narrower range, between 13.53 and 13.23,
since early July when Mexico elected opposition presidential
candidate Enrique Pena Nieto as expected.
But his Institutional Revolutionary Party (PRI) failed to
capture a majority in both houses of congress as the market
hoped, dashing expectations he could quickly make good on
promised reforms like opening up state-owned oil monopoly Pemex
to private investment.
"Hopes for speedy reforms in the energy sector are dimmed
somewhat but they are not squashed," said Kathryn Rooney-Vera, a
Latin American strategist for Bulltick Capital Markets in Miami.
The blunted optimism has been compounded, she said, by a
series of poor economic data from Mexico's top trading partner,
the United States.
For the next five days, the peso is seen trading between
13.55 and 13.25 against the dollar, financial group Monex said
in a note.
Volumes were low in Brazil after the real closed practically
flat on Monday in a session with very thin trading volume due to
a holiday in Sao Paulo state, where most of the country's
financial institutions are concentrated.
The Chilean peso gained 0.28 percent, supported by
continued sales of dollars by companies, and pension funds that
had already driven the currency to a near two-month high on
Monday, traders said.
Latin American FX prices from Reuters at 1956 GMT:
Currencies daily % year-to
change date %
Latest change
Brazil real 2.0362 -0.41 -8.24

Mexico peso 13.3665 -0.20 4.51

Argentina peso* 5.9500 0.17 -20.50

Chile peso 492.9000 0.28 5.36

Peru sol 2.6310 0.23 2.51

* Argentine peso's rate between
brokerages