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EMERGING MARKETS-Mexico peso retreats from 4-month high, Latam FX up

MEXICO CITY, March 16 (Reuters) - Mexico's peso pulled back from a more than four-month high on Thursday as other Latin American currencies extended their advance for a second session on bets the United States will hike interest rates this year less than previously expected.

The peso hit 19.05 per dollar earlier in the session, its strongest since it was battered by the election of Donald Trump as U.S. President, but its advance flagged as the currency retreated to around 19.26 per dollar.

The Mexican peso has been the strongest performing major currency this year, up close to 8 percent against the dollar, backed by expectations that Trump will not impose major barriers on U.S.-bound Mexican goods.

On Wednesday, the peso got a lift on comments from Trump trade advisor Peter Navarro who said new free trade talks could make North America a "powerhouse." U.S. Treasury Secretary Steven Mnuchin said on Thursday that the Trump administration has no desire to get into trade wars, but certain trade relationships need to be re-examined to make them fairer for U.S. workers.

The Fed raised rates for a second time in three months on Wednesday but both the policy-setting committee and Chair Janet Yellen said future increases will be "gradual." A slower pace of rate hikes would support demand for emerging market assets, which tend to lure foreign investors with higher yields.

The Chilean and Colombian pesos strengthened more than 1 percent.

The Brazilian real, however, slipped after the central bank indicated it could allow around $4.2 billion worth of traditional currency swaps, which correspond to future dollar sales to investors, to expire at the end of the month.

Key Latin American stock indexes and currencies at 2055 GMT: Stock indexes daily YTD % % change Latest change MSCI Emerging Markets 963.20 2.09 11.71 MSCI LatAm 2624.66 1.39 12.13 Brazil Bovespa 65782.85 -0.68 9.22 Mexico IPC 48056.56 1.23 5.29 Chile IPSA 4616.47 1.49 11.20 Chile IGPA 23163.73 1.37 11.72 Argentina MerVal 19601.29 1.2 15.86 Colombia IGBC 9964.25 0.78 -1.62 Venezuela IBC 37783.00 0.38 159.00 Currencies daily YTD % % change change Latest Brazil real 3.1131 -0.09 26.57 Mexico peso 19.26 -0.21 -10.53 Chile peso 662.2 1.21 7.17 Colombia peso 2917.43 1.65 8.63 Peru sol 3.252 0.15 4.98 Argentina peso (interbank) 15.5225 0.32 -16.36 Argentina peso (parallel) 15.99 0.44 -10.76 (Reporting by Michael O'Boyle; Editing by James Dalgleish)