* Mexican peso and Brazil's real lose 0.5 pct
* Gains by Brazil's opposition party make traders nervous
* Chile prepares for Thursday's interest rate decision (Adds comments, updates prices to close)
By Samantha Pearson and Caroline Stauffer
SAO PAULO/MEXICO CITY, Oct 14 (Reuters) - Yields on Brazil's interest rate futures contracts fell on Thursday as investors woke up to the possibility that opposition candidate Jose Serra may soon be the country's next president.
Until now, investors had been brushing off Brazil's election as a "non-event" because ruling party candidate Dilma Rousseff looked set to sail to an easy victory at the end of this month, bringing few changes to current policy.
But the most recent opinion poll on Thursday, showing Serra is almost tied with Dilma, has caused a last-minute scramble on trading floors. [ID:nN14103392]
"If someone starts believing Serra will win he is going to prepare for tougher fiscal measures, which would allow interest rates to fall in the future," said Paulo Petrassi, a partner at Brazil's Leme Investimentos.
The yield on the interest rate futures contract due in
January 2012
While the election was the main driving force of the market on Thursday, concerns about global growth were also on investors' minds, Petrassi said.
RUSH TO TAKE PROFITS
Weak data on U.S. jobless claims on Thursday added to concerns about a slowdown in the world's biggest economy, also causing the region's currencies to weaken sharply.
The Mexican peso and Brazilian real were further hit by profit-taking after both currencies strengthened to key levels in early trading.
Mexico's peso weakened 0.5 percent to 12.4480. The peso appreciated to the 12.35 level earlier in the session, which triggered a round of profit-taking that weakened the peso to its session low of 12.4757.
The Chilean peso
Minutes of the central bank's September rate-setting meeting released last week showed bank board members saw the peso's recent appreciation possibly impacting monetary policy.
"Specifically, the minutes mention both the appreciation of CLP and falling inflation expectations as reasons to, at that meeting, adopt a slower pace of policy tightening," a report from Nomura Securities said.
The Brazilian real
Traders were quick to take profits after the currency broke through the closely watched level of 1.65 reais per dollar earlier in the session.
Recent election polls have also started to unnerve investors. As well as adopting a tougher fiscal stance, Serra is expected to take a more proactive role to weaken the currency and protect exporters.
"Serra has clearly come out in favor of a weaker currency here," said Luciano Rostagno, chief strategist for CM Capital Markets in Sao Paulo. (Additional reporting by Silvio Cascione in Sao Paulo, Brad Haynes and Froilan Romero in Santiago; Editing by Dan Grebler)