EMERGING MARKETS-Brazil's real rises ahead of rate decision, soft dollar lifts Latam FX

* Brazil expected to keep rates steady * Brazil senate committee approves new fiscal rules * Analysts turn bullish on Petrobras * Argentina to make $1.9 bln payment to IMF as scheduled - source (Updated at 1917 GMT) By Amruta Khandekar and Bansari Mayur Kamdar June 21 (Reuters) - The Brazilian real rose on Wednesday ahead of a policy decision where the central bank is expected to hold interest rates steady, while regional peers climbed against a weakening dollar after Federal Reserve Chair Jerome Powell's comments. The real gained 0.4% in choppy trade, following two straight sessions of declines. The Brazilian central bank is expected to hold rates at 13.75% at its policy announcement later in the day, though there has been growing speculation about rate cuts as soon as August given falling inflation and pressure from President Luiz Inacio Lula da Silva's government. "In our base case, rates are likely to start falling by August. Although we don't expect them (the Brazilian central bank) to cut rates tonight, there is likely to be some change in wording in terms of their guidance," said Wilson Ferrarezi, Latam economist at TS Lombard, who added that the central bank is likely to be less hawkish than before. In another development, Brazil's Senate economic affairs committee gave its approval to new fiscal rules proposed by Lula's government, marking another step forward for the project deemed crucial in curbing uncontrolled growth of the public debt. "We think Brazil is currently in a rare situation, where both the economy and politics are supportive amid a global risk-on environment," said Ronaldo Patah, Chief Investment Officer Brazil at UBS in a note, adding that the Goldilocks scenario is usually linked with a decrease in portfolio risk. Analysts at major global banks have also been upgrading their share price expectations for Brazil's Petrobras as they evaluate that the new leftist government's policies are not as unfriendly to investors as some had feared. Shares of the state-run oil firm climbed 4.5%, outperforming the 0.6% gain on the Bovespa index. The broader Latin American currencies index climbed 0.3%, with the dollar falling 0.5% after Powell's comments to lawmakers on Capitol Hill failed to live up to the more hawkish market expectations. The Mexican peso gained 0.6%, tracking an uptick in crude prices. Oil producer Colombia's currency also added 0.1% against the dollar. A labor reform pushed by Colombia's government was shelved on Tuesday after committee legislators in Congress' lower house failed to reach a quorum in a scheduled first debate, dealing a major setback to leftist President Gustavo Petro. Argentina will make scheduled payments totaling some $1.9 billion to the International Monetary Fund (IMF) on Wednesday, an economy ministry source said. Meanwhile, the Peruvian sol, the currency of world's No.2 copper exporter, was flat. Markets in Chile were closed for a holiday. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1005.17 -0.8 MSCI LatAm 2502.57 0.69 Brazil Bovespa 120295.96 0.56 Mexico IPC 54123.78 -0.44 Argentina MerVal 429243.62 4.843 Colombia COLCAP 1156.84 -0.36 Currencies Latest Daily % change Brazil real 4.7686 0.53 Mexico peso 17.1133 0.52 Colombia peso 4142.5 0.14 Peru sol 3.6245 -0.11 Argentina peso 251.8500 -0.95 (interbank) Argentina peso 487 1.03 (parallel) (Reporting by Amruta Khandekar and Bansari Mayur Kamdar; editing by Jonathan Oatis and Nick Zieminski)