EMERGING MARKETS-Latam FX rallies on commodity gains, dollar weakness

* Iron ore, copper and oil prices rise * Latam stocks at 2-month high (Writes through with Latam, updates prices) By Susan Mathew and Ambar Warrick Jan 12 (Reuters) - Most Latin American currencies rose on Wednesday as hopes of more stimulus in China drove up commodity prices, while the dollar slumped after U.S. inflation data came in as expected. Brazil's real added 0.8%, while Mexico's peso firmed 0.2%. Iron ore, oil and copper prices rose as weak Chinese inflation data kept the door open for more liquidity measures by the PBOC. Chile's peso rose 0.6% to a near two-month high, while Colombia's peso hit a one-month peak. The dollar slipped as data showed a 7.0% annual increase in U.S. inflation, the largest in nearly four decades and cementing expectations of an interest rate hike in March. The greenback extended losses logged after Fed Chair Jerome Powell on Tuesday stuck to a previously signaled stance on monetary policy. Analysts were broadly of the opinion that the Fed will hike in March. "Wednesday's CPI report doesn't change anything for the Federal Reserve's policy plans and it has already told the markets that it expects a tight labor market, rising wages and low unemployment to continue," said George Ball, chairman of investment firm Sanders Morris Harris. Interest rate hikes in Latin America are also on the cards this year, after inflation surged through 2021. Brazil's central bank has taken the necessary steps to ensure inflation targets are met for 2022, 2023 and 2024, its chief Roberto Campos Neto said on Tuesday, reaffirming it is appropriate to advance the process of monetary tightening significantly into restrictive territory. Brazil's monetary policy committee has been the most aggressive in the world, raising the policy rate by 725 basis points last year. COVID-19 worries continued. The Pan American Health Organization the rate of infections in the Americas, caused by the Omicron variant, had reached unprecedented levels. Data from the Institute of International Finance showed net capital flows to emerging markets rose last month from November but fell more than 75% year-on-year, with China the main recipient as investors fear other economies will continue to underperform due to the pandemic. Latam shares surged after the U.S. inflation reading, with MSCI's index of regional stocks up 2.5% at a two-month high. Shares of troubled Mexican airline Aeromexico jumped nearly 5% after its creditors overwhelmingly approved the company's restructuring plan as part of its efforts to emerge from bankruptcy. The stock tumbled more than 50% last month and has made wild swings since, after a tender offer valued it at a fraction of its market capitalization. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1268.61 2.06 MSCI LatAm 2187.08 2.48 Brazil Bovespa 105312.07 1.48 Mexico IPC 53935.81 1.65 Chile IPSA 4484.96 2.05 Argentina MerVal 84978.89 0.327 Colombia COLCAP 1446.86 1.71 Currencies Latest Daily % change Brazil real 5.5350 0.80 Mexico peso 20.3379 0.18 Chile peso 823.03 0.56 Colombia peso 3970.51 0.44 Peru sol 3.8896 0.18 Argentina peso 103.6600 -0.09 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Kirsten Donovan and John Stonestreet)