EMERGING MARKETS-LatAm assets advance as Democrats take control of Congress

By Ragini Mathur and Sudeshna Ghoshal

Nov 4 (Reuters) - Latin American equities and currencies advanced on Wednesday as Democrats swept both chambers of the US Congress in the midterm elections, weakening the dollar and increasing the allure of riskier emerging-market assets.

Democrats seized control of both the Senate and House of Representatives on Tuesday after scoring victories in Republican strongholds for the first time in generations.

"The Democrat sweep may lead to more constraints on fiscal and tariff policy, which means less inflationary pressure and lower US interest rates than might have been the case otherwise," said Hasnain Malik, managing director, geopolitical risk and emerging markets equity strategy at Tellimer Research.

The dollar fell 0.3% against a basket of major currencies , while US Treasury yields eased as investors positioned for increased political gridlock in Washington.

A softer dollar and lower US yields typically support emerging-market assets by easing financial conditions and reducing debt servicing costs, while making higher-yielding developing-market currencies more attractive.

MSCI's Latin American currency index .MILA00000CUS rose 0.8%, after earlier touching its lowest level since April. The regional equities index .MILA00000PUS gained 1.7%, recovering from its weakest point since January.

In Brazil, the region's largest economy, the Bovespa index .BVSP rose 1.1%, the most among peers, and was poised to snap a six-session losing streak, while the real gained 0.65% ahead of its central bank policy decision later on Wednesday.

The decision will test whether the election outcome has shifted expectations for monetary policy after five consecutive quarter-point rate cuts.

The outlook for Brazil's real has weakened on concerns over fiscal policy following the re-election of President Luiz Inacio Lula da Silva, a Reuters poll of foreign-exchange strategists showed.

Investors worry that Lula may not deliver sufficient fiscal adjustment to address Brazil's chronic budget problems, especially after spending promises made during the election campaign.

Mexico's benchmark stock index .MXX pared earlier gains after climbing to its highest level since March. It was last up 0.76%, while the peso strengthened 1.38% against the dollar.

"The idea that Democrats are coming in and kind of putting a bit of the brakes on the economic agenda by the White House means ... that they'll likely promote no tariffs," said Juan Perez, director of trading at Monex.

"Because the USMCA and any amendments to it require congressional approval, if they are willing to say, 'No, we don't want to change this and we don't want to put the business and commercial relationship with Mexico at risk,' then that is really good news for the Mexican peso going forward."

The United States-Mexico-Canada Agreement underpins Mexico's trade and manufacturing ties with its largest export market. Changes to the pact could deter investment and pressure the peso.

Chile's peso rose 1.64%, while the country's stock index .MMXIPSAGC jumped 2.52%.

Minutes from the Chilean central bank's latest meeting showed policymakers viewed holding rates steady or raising them by 25 basis points as plausible options, before unanimously holding the benchmark rate unchanged at 4.5% last week.

Colombian stocks .COLCAP were down 1.16%, bucking the regional trend, as Brent crude dropped over 8%, weighing on the oil-exporting market.

Key Latin American stock indexes and currencies at 1943 GMT: