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EMERGING MARKETS-Argentine peso rebounds following dramatic rate hike

(Updates prices, adds news from Chile and Venezuela) SAO PAULO/BUENOS AIRES, May 4 (Reuters) - Argentina's peso strengthened sharply on Friday, gaining over 5 percent against the dollar after the central bank hiked the benchmark interest rate to 40 percent in a dramatic bid to shore up the currency.

On Thursday, the peso plunged nearly 8 percent even as the central bank hiked the rate by 300 basis points, its second surprise hike in less than a week.

After that move failed to calm markets, the bank boosted the rate again on Friday by 675 basis points. The central bank has hiked the benchmark rate some 1,275 basis points since April 27.

That appeared to do the trick for now, and the peso rallied 5.26 percent by late afternoon.

Elsewhere in the region, currencies were mixed as traders' eyes were fixed on the ongoing tariff talks between the United States and China.

The Mexican peso was the biggest loser, falling 1 percent against the dollar after the U.S. Labor Department reported job growth increased less than expected in April. The report stoked bets of constrained monetary policy.

Chile's new government, meanwhile, announced it will slash $1.15 billion from its budget in 2018 and a total of $4.6 billion through 2021 in an effort to return the country to "fiscal responsibility." Finance Minister Felipe Larrain said on Friday the cuts are the equivalent of 1.6 percent of the annual budget.

In Colombia, the peso currency rose 1.35 percent, helped by solid oil prices, which rose on Friday as the market awaits news from Washington on possible new sanctions on Iran.

In crisis-racked Venezuela, the chairman of the country's top bank, Banesco, condemned a 90-day state takeover and arrest of 11 executives on Friday as locals thronged cash machines and sped up transfers to other institutions.

The move marked the biggest crackdown on the country's financial sector since late leftist leader Hugo Chavez.

The government of Chavez's successor, President Nicolas Maduro, said on Thursday it was targeting Banesco for "attacks" against the OPEC country's rapidly depreciating currency.

Key Latin American stock indexes and currencies at 2037 GMT: Stock indexes Latest daily % change YTD % change MSCI Emerging 1136.17 -0.15 -1.92 Markets MSCI LatAm 2853.00 0.42 0.88 Brazil Bovespa 83118.03 -0.2 8.79 Mexico IPC 46992.17 -0.22 -4.79 Chile IPSA 5622.24 -0.32 1.04 Chile IGPA 28344.67 -0.24 1.30 Argentina MerVal 28736.99 -2.6 -4.42 Colombia IGBC 12301.10 -0.42 8.18 Venezuela IBC 20169.56 -8.22 1496.78 Currencies Latest daily % change YTD % change Brazil real 3.5278 -0.14 -6.08 Mexico peso 19.2500 -1.00 2.33 Chile peso 621.35 -0.52 -1.08 Colombia peso 2819.45 1.35 5.77 Peru sol 3.27 0.06 -1.01 Argentina peso 21.8500 5.26 -14.87 (interbank) Argentina peso 21.65 -0.46 -11.18 (parallel) (Reporting by Gram Slattery and Hugh Bronstein; Editing by Jeffrey Benkoe and Dan Grebler)