EMERGING MARKETS-Dollar strength amid risk aversion keep currencies subdued

* Israel's shekel falls 0.6% despite interest rate hike * Pakistan's central bank keeps policy rate unchanged * Colombian peso slides as oil drops 4% (Adds comments, updates prices throughout) By Susan Mathew and Shreyashi Sanyal Aug 22 (Reuters) - Emerging market currencies were muted on Monday as the dollar gained momentum, with Brazil's trading in a narrow range, while Israel's shekel fell despite an interest rate hike by the country's central bank. Risk aversion amid inflation and recession fears rose on Monday following Russia's announcement of a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month, as well as calls for faster monetary policy tightening by members of the Federal Reserve. Brazil's real steadied after a fall earlier in the session, with markets keeping close watch for any updates on a heated presidential race between Luiz Inacio Lula da Silva and incumbent President Jair Bolsonaro. "The Fed will remain hawkish, the USD will recover its safe haven status, and domestically (in Brazil) the traditional electoral cycle will weigh on local assets," said Mauricio Une senior strategist at Rabobank. Investors will look to the U.S. central bank's stance after it hiked rates by 225 basis points since March. The dollar marched ahead, with a weakening euro aiding its gains. Israel's shekel fell 0.7% to near two-week lows after the central bank hiked its key rate by 75 basis points to 2%, to rein in inflation that has topped 5%. "We think the (central bank) sees the need for testing rates in or above this range in the coming months, based on the current outlook," strategists at Citigroup said. "However, this more aggressive path also raises the prospect of a more sudden stop or even reversal in the policy rate path, should the data warrant it." Pakistan's central bank, meanwhile, held its main policy rate at 15%, as expected, adding that it would closely watch inflation data and global commodity prices. The central bank hiked rates by 125 basis points in July. Mexico's peso was flat, while crude exporter Colombia's peso slipped 0.4% with oil prices sliding 4%. Colombia lowered its economic growth projection for next year to 2.2%, down from a previous 3.2%, Finance Minister Jose Antonio Ocampo said on Friday, adding that he does not think the country will regain its investment grade soon. The Argentine peso fell 0.4% despite tight controls. Argentina's government on Sunday appointed a well-known economist and vocal critic of the policies of Cristina Fernandez de Kirchner, the current vice president and former president, to effectively be the second in command of the key economy ministry. Key Latin American stock indexes and currencies at 1854 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 991.34 -1.01 MSCI LatAm 2178.02 0.12 Brazil Bovespa 110496.73 -0.9 Mexico IPC 47919.02 -1.12 Chile IPSA 5351.45 1.11 Argentina MerVal 131832.36 0.628 Colombia COLCAP 1295.67 -0.93 Currencies Latest Daily % change Brazil real 5.1538 0.27 Mexico peso 20.1323 0.09 Chile peso 941 0.26 Colombia peso 4392.93 -0.52 Peru sol 3.8698 -0.48 Argentina peso (interbank) 136.6400 -0.34 Argentina peso (parallel) 288 2.43 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Paul Simao and Cynthia Osterman)