EMERGING MARKETS-Latam currencies firm on euro optimism

* German sentiment data adds to good mood

* Brazil's real adds 0.5 pct, Mexican peso edges up

* Real supported ahead of expected interest rate hike

By Samantha Pearson and Froilan Romero

SAO PAULO/SANTIAGO, Jan 18 (Reuters) - Latin American currencies firmed on Tuesday on optimism over the economic health of the euro zone, prompting a return to riskier assets worldwide.

Germany's ZEW investor sentiment index surged as expectations increased that Europe's powerful export engine will generate new jobs and investments. [ID:nLDE70H0UU]

Also increasing investors' appetite for risk, and pushing down the U.S. dollar, were signs that policymakers will eventually firm up plans to ease the euro zone's debt crisis. [ID:nLDE70H0DQ]

The Brazilian real BRBY was bid 0.53 percent stronger at 1.672 reais per U.S. dollar on the local spot market in early trading.

Expectations that Brazil's central bank will have to raise interest rates on Wednesday helped the real to outperform the region in early trading. [ID:nSPG003198]

Brazil has been reluctant to raise its already high borrowing costs for fear of attracting even more short-term, speculative money.

But growing inflation has made such an interest rate hike seem inevitable. While the consensus among economists and market participants is for a 50 basis point rise, the market has also partially priced in a 75 basis point increase.

"(A) recent surge in food commodity prices - fueled by growing inflation fears globally and markets' perception that central banks have been reluctant to tighten - could aggravate the situation further and could further deteriorate inflation expectations," Zeina Latif, chief Brazil economist at RBS in Sao Paulo, said in a research note.

The Mexican currency MXN= strengthened less than 0.1 percent to 11.9681 per dollar in dawn trading in Mexico City.

The Chilean peso CLP= also firmed less than 0.1 percent to 490.90 per dollar as the price of copper, the country's main export, rose sharply. [ID:nLDE70H0DP]

"The losses shown by the dollar against the euro are pushing up the price of raw materials, such as copper. For now, that's the fundamental reason for the peso's gains," said one currency trader in Santiago.

(Editing by Chizu Nomiyama)