EMERGING MARKETS-Brazil's real firms on rate hike bets; protests hurt Colombian peso

* Benchmark Selic rate seen up 75 bps * Brazil's industrial production falls less than expected * Colombian peso at 6-mth low * Stocks recover from sharp losses (Adds details on EMFX, updates prices) By Shashank Nayar and Ambar Warrick May 5 (Reuters) - Brazil's real led gains across Latin American currencies on Wednesday after strong economic data and on expectations of a large rate hike by the central bank, while Colombia's peso fell further on continued protests in the country. The real rose 1.4% as investors bet on another 75 basis-point hike in the benchmark Selic rate to 3.5%, when it meets at 2100 GMT. The bank began a tightening cycle this year to help curb elevated inflation rates and support weak fiscal conditions, and hiked rates by 75 basis points in March. The real lost almost 30% of its value last year as Brazilian interest rates were cut to a record low 2% in response to the COVID-19-induced recession. The currency has declined 4% so far this year as a jump in infections made investors fret over the fiscal outlook. "There is some risk that the BCB (Brazilian Central Bank) moves with a more aggressive hike today and/or continues to signal a continued pace of aggressive tightening in the near term," said Ned Rumpultin, a strategist at TD Securities. "The BCB will need to boost the BRL's yield advantage high enough to offset this fiscal risk premium (and draw in capital). At the same time, the BRL will need to become more competitive in the EM space" on a yield-to-volatility basis. Industrial production in Brazil fell in March for a second consecutive month, figures showed, but the decline was not as steep as economists expected, meaning first-quarter output growth accelerated. Colombia's peso fell for the fifth consecutive session, dropping 0.6% to a six-month low as countrywide protests against a now withdrawn controversial tax reform were set to continue on Wednesday. A recent dip in the U.S. dollar and Treasury yields has spurred buying into high-yielding emerging market currencies, with Mexico's peso and the South African rand benefiting from increased interest in carry trade. But the dollar hit a two-week high on Wednesday after Treasury Secretary Janet Yellen said that rate hikes may be needed to prevent overheating and quell coming inflationary pressures. Chile's peso and Mexico's peso fell against the dollar despite a rise in copper and oil prices, as the potential for higher U.S. interest rates weighed on high-yielding assets. MSCI's index of Latin American stocks jumped 2.5% after a sharp selloff on Tuesday, and was set for its best day in nearly two months. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1334.08 -0.07 MSCI LatAm 2414.33 2.45 Brazil Bovespa 119473.64 1.5 Mexico IPC 48527.59 0.41 Chile IPSA 4712.20 1.36 Argentina MerVal 49182.85 1.084 Colombia COLCAP 1233.21 1.28 Currencies Latest Daily % change Brazil real 5.3589 1.35 Mexico peso 20.2438 -0.32 Chile peso 704 -0.09 Colombia peso 3848.38 -0.59 Peru sol 3.824 0.23 Argentina peso 93.7500 -0.03 (interbank) (Reporting by Shashank Nayar in Bengaluru; editing by Barbara Lewis and Cynthia Osterman)