EMERGING MARKETS-Bumper retail sales lift Brazil's real, Mexican peso at six-month high

By Susan Mathew Sept 10 (Reuters) - Brazil's real extended gains to a second day on Thursday after July retail sales surged to a six-year high, while other Latin American currencies capitalized on the dollar's weakness. A jump in the euro, after the European Central Bank reiterated that there were no foreign exchange targets for the common currency, weighed on the dollar. But elevated weekly jobless claims numbers in the United States underscored a tough road ahead from the economic damage wrought by the coronavius pandemic. Brazil's real rose half a percent after an increase retail sales came in four times more than estimated, as easing of cornavirus-induced lockdowns improved economic activity. But analysts warn that more pain may be in store for the real, which is among the worst performing emerging markets currencies so far this year, down about 24%. "Disagreements over various reform projects against the background of narrow fiscal and monetary policy leeway act as a burden. We therefore do not expect a stronger real until next year at the earliest and after the corona crisis has been priced out," wrote Commerzbank FX analysts Melanie Fischinger and You-Na Park-Heger in a note. Mexico's peso rose 0.7% to hit six-month highs, reaching pre-pandemic levels, and cutting losses this year to about 11%. Chile's peso touched an over five-week peak. Analysts expect its central bank to hold the benchmark interest rate steady at 0.5% for at least the next year and half and see the rate hitting 1% within two years. Argentina's currency slipped, but a risk indicator showed that investor perception of Argentine debt had improved since the successful restructuring of foreign and local sovereign bonds. Gains in Peru's sol were more reluctant ahead of a central bank meeting due later in the day. Credit Suisse analysts expect the bank to hold the key interest rate at 0.25% until 2021. "We think the bank will reiterate that it expects inflation to be contained due to weakness in domestic demand ... The bank will likely underline that it considers appropriate to keep a strongly expansive monetary stance for a prolonged period," said CS analyst Alberto J. Rojas. Stocks in the region were mixed, with Chile's IPSA index hitting a near six-month low, while Mexican shares rose 0.2%. Brazil's main index was flat as a jump in food retailer GPA on plans to spin off its Assai wholesale unit were countered by losses in mining and oil majors. Key Latin American stock indexes and currencies at 1414 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1092.08 0.58 MSCI LatAm 2019.33 0.74 Brazil Bovespa 101011.45 -0.28 Mexico IPC 36270.93 0.31 Chile IPSA 3737.88 -0.9 Argentina MerVal - - Colombia COLCAP 1231.11 -0.71 Currencies Latest Daily % change Brazil real 5.2715 0.53 Mexico peso 21.2244 0.60 Chile peso 764.80 0.38 Colombia peso 3694.06 0.31 Peru sol 3.5317 0.14 Argentina peso 74.8300 -0.08 (interbank) (Reporting by Susan Mathew in Bengaluru;)