By Bruno Federowski
SAO PAULO, June 12 (Reuters) - Brazil's stocks and currency slipped on Monday as traders feared lengthy legal proceedings against President Michel Temer could further delay the implementation of his reform agenda.
The top electoral court on Friday dismissed a case that threatened to unseat Temer, giving him some breathing room but potentially lengthening a political crisis. Temer is being investigated separately by federal prosecutors for corruption, obstruction of justice and racketeering.
Brazilian markets have sold off since the scandal broke last month as questions grew over the future of Temer's planned reforms of the country's pension system and labor regulations.
The Brazilian real slipped 0.59 percent on Monday after weakening nearly 5 percent since May 18, when reports emerged that Temer was caught on tape allegedly condoning bribes to silence a key witness in a corruption case.
The benchmark Bovespa stock index fell 0.82 percent, weighed down by blue-chip shares, including lenders Banco Bradesco SA and Itaú Unibanco Holding SA and miner Vale SA.
Also fueling caution was the Federal Reserve's policy meeting this week, when the U.S. central bank is expected to hike benchmark interest rates.
Still, a mixed batch of U.S. economic data has cooled bets on further hikes, with traders looking to the Fed's policy statement for clues on the pace of future tightening.
The Mexican peso gained 0.22 percent after notching a 10-month high last week, while the Chilean peso firmed 0.33 percent to end the day at its highest level in eight weeks. (Reporting by Bruno Federowski; Editing by Dan Grebler, G Crosse)