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EMERGING MARKETS-Latam FX drops on high yields, Colombian peso supported by oil

    * Mexican peso at four-month low
    * Brazil's real pares initial gains
    * Latam stocks fare better than FX

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    March 4 (Reuters) - Colombia's peso led gains across Latin
American currencies on Thursday as oil prices scaled one-year
highs, while most other units fell as U.S. Treasury yields rose
after the Federal Reserve reiterated an easy monetary policy.
    The Colombian currency was set for its biggest daily
gains in a month, as it recovered from lows last seen in
November. Oil prices trended higher ahead of an OPEC+ meeting
that is expected to extend supply cuts. 
    Most other Latam currencies were muted as U.S. Treasury
yields rose, dampening appetite for risk-driven assets. Fed
Chair Jerome Powell reiterated his pledge to keep policy loose
and tolerate spikes in inflation.
    "The higher-beta (EM) currencies could do relatively well —
even in an environment of rising rates — as long as global
recovery expectations remained firm," analysts at TD securities
said.
    Global inflation expectations have risen recently as
investors expect steady COVID-19 vaccine rollouts to eventually
spur a return to economic normalcy.
    But most Latam currencies face a tougher road to recovery
than their emerging market peers, due to sluggish vaccination
drives and concerns over populist policies in major economies.
    Brazil's real pared initial gains to trade lower,
with investors showing a mixed reaction to the Senate's passing
of a constitutional amendment letting the government extend
emergency pandemic aid without exceeding spending caps.

    Sentiment towards Brazilian markets has been hit since the
firing of Petrobras' chief executive last week, which
raised concerns of the government adopting populist policies. 
    "The reality is that the Petrobras incident has reinforced
market concerns about the Bolsonaro administration's lack of
commitment to reduce state intervention in the economy, and it
will take tangible success on the reform front for the
government to regain even part of the market confidence it
lost," analysts at TS Lombard wrote in a note. 
    Mexico's peso, which fell 0.7% to a four-month low,
has also faced pressure from concerns over government
intervention in local energy markets.
    Latam stocks fared better than currencies, given that they
stand to benefit the most from loose monetary policy. Brazilian
stocks rebounded from more than three-month lows.
    Chilean lithium producer SQM fell despite marking
record lithium sales in the fourth quarter, as floundering
prices for lithium weighed on the company´s profits.

    Chilean President Sebastian Pinera announced a new plan to
overhaul the country´s heavily criticized pension plan - a
principal demand of protesters during widespread riots in 2019
that had hammered the peso. 
    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1340.07             -2.75
                                        
 MSCI LatAm                    2230.61              0.54
                                        
 Brazil Bovespa              112576.02              1.25
                                        
 Mexico IPC                   46424.85               0.1
                                        
 Chile IPSA                    4715.06             -1.51
                                        
 Argentina MerVal             47785.39             0.973
                                        
 Colombia COLCAP               1339.81             -0.55 Currencies             Latest     Daily % change
 Brazil real                    5.6516              0.17
                                        
 Mexico peso                   21.0810             -0.69
                                        
 Chile peso                      729.7             -0.37
                                        
 Colombia peso                 3643.15              0.99
 Peru sol                       3.6817             -0.24
                                        
 Argentina peso                90.2900             -0.07
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; editing by Barbara
Lewis and David Evans)
  
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