EMERGING MARKETS-Fed nerves weigh on Latam currencies, commodity gains boost energy and mining stocks

* Fed decision eyed Wednesday * Brazil's real falls past 5 to the dollar * MSCI Latam FX index at lowest since March 4 (Updated at 3:50pm ET/1950 GMT) By Sruthi Shankar and Lisa Pauline Mattackal March 18 (Reuters) - Latin American currencies broadly fell on Monday as the dollar firmed amid bets the Federal Reserve will keep interest rates higher for longer, though stock markets in the region got a lift from rising commodity prices following upbeat data from top consumer China. The MSCI index tracking Latin American currencies dipped 0.6%, falling to a two-week low. Focus will be on the Fed's policy decision on Wednesday after hotter-than-expected readings on U.S. inflation and the labor market in recent weeks led investors to rein in bets of big and quick interest rate cuts. "Powell must reinforce that it is necessary to achieve higher confidence in price stabilization to start a cycle of interest rate cuts," analysts at StoneX said, referring to Federal Reserve Chair Jerome Powell. "If these expectations are confirmed, investors' risk appetite will likely decrease, and the U.S. currency will strengthen against other currencies." The Brazilian real weakened past 5 per dollar for the first time since Feb. 5 ahead of a domestic interest rate decision later in the week, down 0.5% on the day. Data showed economic activity in Brazil started the year growing above expectations amid strength in the retail and services sectors. The Mexican peso and the Peruvian sol dipped 0.8% and 0.4% respectively. Brazil's main Bovespa stock index was flat. Shares of Embraer rose 1.5%, recovering from early losses after the planemaker said it "continues to face challenges in the supply chain." Miner Vale climbed 1.9% as iron ore prices rebounded after upbeat data in top consumer China renewed hopes for a pick-up in steel demand in coming weeks. "China’s equities have stabilised reducing the risk of spill over to emerging markets elsewhere," Jon Harrison, managing director of EM Macro Strategy at TS Lombard wrote. However, Harrison noted that while Asian emerging markets remain well supported, politics and external risks curb Latin American markets. MSCI's index of Latin American stocks fell 0.6%, trailing a gauge of global emerging market stocks which rose 0.3%. Mexico-listed miner Grupo Mexico leapt over 7%, lifting Mexican stocks 0.3%. Argentina's Merval index jumped 4% to lead gains in the region. Energy company YPF shares were up nearly 7%. Chile's economy experienced a slight expansion of 0.1% in the fourth quarter of 2023 compared to the previous quarter, data showed, a figure slightly below market consensus. Chile's stock market slipped 0.1%, while its currency lost 0.6% despite prices of copper, the country's principal export, hitting 11-month highs. Chile's peso is one of the poorest performing currencies in the region, down over 7% against the dollar so far in 2024. Key Latin American stock indexes and currencies at 1950 GMT: Latest Daily % change MSCI Emerging Markets 1037.39 0.26 MSCI LatAm 2492.20 -0.62 Brazil Bovespa 126738.06 0 Mexico IPC 56228.40 0.3 Chile IPSA 6454.41 -0.14 Argentina MerVal 1116242.19 4.422 Colombia COLCAP 1307.14 1.72 Currencies Latest Daily % change Brazil real 5.0252 -0.01 Mexico peso 16.8262 -0.79 Chile peso 947.5 -0.59 Colombia peso 3892.27 -0.38 Peru sol 3.6887 -0.37 Argentina peso 852.0000 -0.12 (interbank) Argentina peso 995 3.02 (parallel) (Reporting by Sruthi Shankar and Lisa Mattackal in Bengaluru; Editing by Susan Fenton and Alistair Bell)