EMERGING MARKETS-Brazilian assets steady as investors gear up for pivotal elections

By Sudeshna Ghoshal and Johann M Cherian

Oct 23 (Reuters) - Brazilian assets were steady on Friday as investors geared up for a presidential election in Latin America's largest economy that will determine the trajectory of the country for the next four years.

Voters will decide between right-wing candidate Senator Flavio Bolsonaro and incumbent President Luiz Inacio Lula da Silva on Sunday. Bolsonaro had performed better than expected earlier in the month, but recent polls have shown his lead over Lula was narrowing, sparking volatility in local markets.

The real has rallied 2.6% this month, marking its biggest monthly gain since April, while local stocks .BVSP have advanced 9.5%, its strongest month since January, on expectations that the senator would adopt fiscal consolidation policies if he won. However, analysts said he was yet to offer clarity on the subject.

On Friday, the currency hovered at 5 to the dollar, while stocks were little changed. International bonds , were marginally higher.

Ahead of the vote, data showed consumer inflation rose less-than-expected in the month to mid-October.

"Brazil is at the verge of fiscal dominance dynamics, and anything that improves the fiscal situation can lower risk premia," said Alejandro Cuadrado, managing director, global head FX & LatAm Strategy at BBVA.

"Lower risk premia implies the central bank can find more room to cut, lower interest rates, imply better valuations for Brazilian equities and potential growth and that brings flows from the offshore into Brazil."

MSCI's index tracking regional equities .MILA00000PUS and currencies .MILA00000CUS were flat as investors weighed the repercussions of higher oil prices on the global economy.

Brent crude prices rose 2% to their highest since early May after Houthi attacks in Saudi Arabia stoked concern over further disruption to energy supplies from the Middle East.

Oil exporter Colombia's peso appreciated the most among regional currencies, up 1% near a one-month high.

The currency has been buoyed recently by remarks by the local central bank on the likelihood that interest rates could stay higher for longer in an effort to combat inflation. The peso is one of the best performing in Latam, up 20% for the year.

Public finances were also in focus as the country's government cut this year's spending budget by 13.8 trillion pesos ($4.33 billion), although it was smaller than previously announced.

The Mexican peso inched up 0.2% against the dollar, but eyed its seventh straight week of losses, hit by expectations of a narrowing of the US-Mexico interest rate differential and uncertainty over the USMCA free trade deal.

Data showed the region's second largest economy grew more than expected in August from the prior month, with all three main sectors posting gains, official data showed.

Elsewhere, Venezuelans took to the streets on Thursday in the first nationwide opposition protest in nearly two years, as demonstrators demanded free elections and other political changes, with a notably thin presence of security forces.

The country's legacy international maturities were marginally higher.

Meanwhile, US first lady Melania Trump secured a ceasefire between Russia and Ukraine in the Russian-controlled city of Oleshky, which will begin on October 29, the White House said.

Kyiv's hard currency bonds , gained over a cent following the news.

Key Latin American stock indexes and currencies at 15:26