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EMERGING MARKETS-Latam FX, stocks set to snap three-day rally as dollar rebounds

* Latam FX, stocks down as dollar rebounds * Brazil's industrial output falls in August * Romania raises interest rate by 75 bps * Poland holds interest rates By Amruta Khandekar Oct 5 (Reuters) - Latin American currencies and stocks fell on Wednesday after a three-day rally, with the dollar gaining ground as recent market optimism driven by bets of less aggressive policy moves by central banks to combat inflation fizzled out. Risk-sensitive assets such as emerging market (EM) stocks and currencies had received a shot in the arm earlier this week after weak U.S. economic data and a smaller-than-expected interest rate hike from Australia spurred hopes that central banks may take a less hawkish approach. However, another large interest-rate hike by New Zealand on Wednesday led traders to temper those expectations, pushing up the dollar and U.S. Treasury yields from recent lows. "The rally that we've seen in equities is looking a little bit overdone," said Christian Lawrence, senior cross-asset strategist at Rabobank, adding that a lot rides on the U.S. non-farm payrolls report due on Friday. "It's fair to say that if we have a very weak non-farm payrolls, then we could well see the dollar head lower again." Regional currencies and stocks fell about 1% each. The Brazilian real fell 1.2%, extending losses to a second straight session as data showed industrial output in Latam's largest economy fell 0.6% in August from July. The country is also gearing up for a second round of voting later in the month after former President Luiz Inacio Lula da Silva fell short of the majority needed for an outright win against far-right President Jair Bolsonaro on Sunday. As copper prices dipped with a rebound in the dollar, top producer Chile's peso fell 1.5%. Mexico's peso dipped 0.9% while Colombia's peso was down 1.2%. Colombia's consumer prices rose 0.93% in September, the government's DANE statistics agency said in a report on Wednesday, taking cumulative 12-month price growth to almost four times greater than the central bank's target. Still, broader EM stocks rallied, buoyed by a jump in Hong Kong shares. Among central and eastern European currencies (CEE), the Romanian leu was up 0.1% against the euro after the country's central bank on Wednesday raised its benchmark interest rate by a greater-than-expected 75 basis points, saying the short-term inflation outlook has worsened. The Polish zloty fell 0.4%. Poland's central bank kept its main interest rate steady at 6.75% in a surprise move on Wednesday. "We are in a situation in Russia-Ukraine, where we could see a bit more of an escalation over the coming months and that leaves me cautious on the region (CEE) overall," said Lawrence. Key Latin American stock indexes and currencies at 1432 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 906.95 1.49 MSCI LatAm 2198.88 -1.73 Brazil Bovespa 116355.92 0.11 Mexico IPC 45630.64 -0.9 Chile IPSA 5186.88 -1.18 Argentina MerVal 144023.78 -0.623 Colombia COLCAP 1186.13 -0.94 Currencies Latest Daily % change Brazil real 5.2420 -1.43 Mexico peso 20.1388 -0.90 Chile peso 944.1 -1.24 Colombia peso 4547 -1.24 Peru sol 3.966 -0.73 Argentina peso 148.8900 -0.20 (interbank) Argentina peso 278 1.44 (parallel) (Reporting by Amruta Khandekar in Bengaluru; Editing by Andrea Ricci)