(Updates with final prices, details from Mexico)
By Bruno Federowski
SAO PAULO, June 7 (Reuters) - Brazil's stock index and currency on Wednesday advanced after a planned reform of labor regulations cleared a hurdle in Congress, but uncertainty over the outcome of an electoral court trial that could oust President Michel Temer limited gains.
Temer's proposal to loosen labor laws won approval from the Senate's economic affairs committee on Tuesday, clearing the way for a full-house vote and reducing expectations that a growing political crisis could jeopardize his reforms agenda. The benchmark Bovespa stock index rose 0.34 percent, driven higher by rising shares of banks such as Ita?? Unibanco Holding SA , Banco Bradesco SA and Banco do Brasil SA .
Brazil's real inched up only 0.13 percent as the TSE, Brazil's top electoral court, argued whether Temer received illegal campaign funding in 2014, when he ran for vice president with his leftist predecessor, Dilma Rousseff. Temer's opponents see a ruling as a way out of the political crisis set off by corruption allegations leveled against the center-right leader, but a decision could take weeks, if not months, and could be appealed by Temer.
Trading was muted in much of Latin America.
In Mexico, the IPC share index and the peso rose very slightly as investors eyed events scheduled for Thursday, when Britain holds a general election, the U.S. Federal Bureau of Investigation's former director testifies to Congress and the European Central Bank (ECB) meets to decide on policy.
"Tomorrow may be the most important day of the quarter for investors," analysts at Brown Brothers Harriman wrote in a note to clients.
Political noise has weighed on demand for risky assets in recent days, with MSCI's emerging stock benchmark dipping for a second day. Contributing to caution were decisions by several Arab countries to cut diplomatic ties with Qatar, accusing it of supporting terrorism. Qatar vehemently denies the allegations.
Key Latin American stock indexes and currencies at 2100 GMT:Stock indexes daily %YTD %
change change
LatestMSCI Emerging Markets 1015.75-0.01 17.8MSCI LatAm 2565.46 0.389.6Brazil Bovespa 63170.73 0.34 4.89Mexico IPC 49274.97 0.11 7.96Chile IPSA 4890.39-0.4417.80Chile IGPA 24508.20 -0.418.20Argentina MerVal 22218.66-0.6131.33Colombia IGBC 10757.84-0.56 6.22Venezuela IBC 83374.02 0.94 162.97
Currenciesdaily %YTD %
change change
Latest Brazil real 3.2721 0.13-0.70Mexico peso 18.22 0.0213.85
Chile peso 668.90-0.04 0.27Colombia peso 2916.5-0.74 2.91Peru sol 3.271-0.12 4.66Argentina peso (interbank) 15.98 0.09-0.66 Argentina peso (parallel)16.31-0.12 3.13 (Reporting by Bruno Federowski; Editing by Jonathan Oatis and Lisa Shumaker)
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