EMERGING MARKETS-Latin American assets extend losses as dollar rises, higher yields weigh

By Utkarsh Hathi

Sept 24 (Reuters) - Most Latin American assets came under pressure on Thursday as a stronger dollar, buoyed by expectations of further Federal Reserve interest rate hikes, dented sentiment, while investors also awaited the Bank of Mexico's interest rate decision.

The yield on the 30-year US Treasury climbed to its highest level since 2004, as elevated energy prices and a resilient economy rekindled fears of prolonged inflation.

The US dollar index also rose 0.2% to a fresh two-month high.

"There's been very little place to hide on this dollar," said Alejandro Cuadrado, global head of FX and Latin America strategy at BBVA.

"We are in the middle of a bigger wave and the persistent pressure has now extended into Latin America and challenges that resilience."

MSCI's index tracking the region's equities .MILA00000PUS declined 0.8%, while its currency equivalent .MILA00000CUS fell 0.7%. Both indexes were hovering near a one-month low.

Chilean stocks .MICL00000PUS fell to nearly a two-month low, down 1.7%, as copper prices were pressured due to a firmer dollar.

Among currencies, the Colombian peso led losses with a 1.3% drop, reaching its lowest level since July 9.

BANK OF MEXICO'S RATE DECISION

Mexico's central bank is widely expected to keep rates on hold later on Thursday for a third consecutive time, while data showed that inflation in the region's second-largest economy accelerated more than expected in the first half of September.

The Mexican peso weakened 0.4%. The currency has been the worst performer against its peers this month. It has also been under pressure due to uncertainty around Mexico's trade negotiations with the US, with the fourth round of talks now expected to take place later in October instead of next week, according to a senior Mexican official.

Market participants said the Brazilian real has been relatively resilient in comparison and held well against the dollar's advance due to higher oil prices and some optimism around the outcome of next month's presidential election.

Brazil's central bank projected inflation close to its 3% target at the policy horizon for its next interest rate decision, reinforcing expectations for further rate cuts.

The real edged 0.2% lower, while Brazil's stock index Ibovespa .BVSP traded 0.1% lower.

The government also widened its primary deficit forecast for 2026 to 80.9 billion reais ($15.61 billion).

Key Latin American stock indexes and currencies at 1432 GMT