EMERGING MARKETS-Brazil's real leads bounceback in Latam currencies

* Real rises in catch-up trade * MSCI Latam Stocks index rises from over 1-month lows * Mexico's peso recovers from 2-week low By Ambar Warrick Jan 26 (Reuters) - Brazil's real led gains on Tuesday as Latin American currencies recovered from recent losses, although sentiment was dampened by increased COVID-19 infections and concerns over fiscal health in the region. The real rose 1.1% in catch-up trade after a long weekend, recovering from steep losses last week sparked by renewed concerns over fiscal spending, as well as the central bank saying it would not hike interest rates any time soon. Interest rates in Brazil will stay low despite inflation reaching a five-year high in mid-January, reflecting the continued economic impact of the pandemic on Latin America's largest economy. Brazilian stocks rose 0.9% after four straight sessions of losses. Fuel distributor Petrobras Distribuidora SA provided the biggest boost to the index after Wilson Ferreira Jr., the former chief executive of state-run power firm Centrais Eletricas Brasileiras was set to take charge of the firm. The MSCI's index of Latin American currencies rose 0.8% from a two-week low. The index has underperformed its broader emerging market peers through 2020. The Latam equity index rose 1.9% off more-than one-month lows. Concerns over the spread of the coronavirus in major economies, uncertainty over vaccine distribution and increased government deficits from fiscal spending have made Latin American assets relatively less attractive than their emerging market peers. A difference in yields with broader emerging markets has also made currencies such as the real and Mexican peso a less desirable means for carry trades. "We believe a rebound in Latam equity markets would be an important step in turning around Latam FX performance. The boost to FX from inflows to Latam asset markets will be greater than the drag from cross-currency trades using Latam currencies," Ilya Gofshteyn, senior EM macro strategist at Standard Chartered, wrote in a note. Mexico's peso rose 0.6% from a two-week low. The country has the fourth-highest death toll from the pandemic in the world, which has weighed on demand for its assets. Chile's peso rose 0.5%, while Colombia's peso added 0.3%. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1390.03 -1.43 MSCI LatAm 2403.94 1.85 Brazil Bovespa 118397.62 0.87 Mexico IPC - - Chile IPSA 4509.01 0.45 Argentina MerVal - - Colombia COLCAP 1397.65 - Currencies Latest Daily % change Brazil real 5.4106 1.11 Mexico peso 19.9925 0.56 Chile peso 729 0.48 Colombia peso 3575.43 0.29 Peru sol 3.6398 0.11 Argentina peso 87.0000 -0.10 (interbank) (Reporting by Ambar Warrick in Bengaluru Editing by Paul Simao)