EMERGING MARKETS-Latam FX near nine-month high, Ukraine talks in focus

Updates to mid-session trading

By Purvi Agarwal and Johann M Cherian

Feb 18 (Reuters) - Latin American currencies firmed on Tuesday, with the MSCI index tracking them set for a sixth session of gains, while investors monitored developments in U.S.-Russia talks in Riyadh aimed at ending Moscow's war in Ukraine.

MSCI's gauge of Latam currencies .MILA00000CUS was 0.3% higher on the day, at levels last seen in late May, while the equities index .MILA00000PUS was 0.1% higher as investors scoured for clues on the outlook for interest rates and U.S. trade policies.

Market focus remained on Riyadh, where the United States and Russia agreed to hold more talks on ending the war in Ukraine after an initial meeting that excluded Kyiv.

Still, Ukraine's bond prices dipped broadly, with the one maturing in 2035 XS2895056369=TE down 1.25 cents on the dollar as investors priced in the likelihood that a peace deal would not be imminent as Russia insisted that Ukraine can never be a NATO member and that NATO forces in Ukraine was also unacceptable.

"A deal that does not resolve Putin’s key demands for Ukraine’s security and sovereignty will likely be insufficient to bring lasting peace to the region," said Liam Peach, senior emerging markets economist at Capital Economics.

"A 'bad deal' forced on Russia would keep the risk of renewed fighting in the future alive and a bad deal imposed on Ukraine, including inadequate security guarantees, could raise serious questions about the future security of Europe."

In Latin America, Brazil's real BRL= firmed 0.4% and the 10-year bond BR10YT=RR rose by 3.4 reals after the country's Treasury announced a new 10-year dollar-denominated sovereign bond, aiming to further its strategy of enhancing liquidity in the country's external yield curve.

Argentina's peso ARS= edged up 0.1%, while its international bonds recovered from early losses, a day after an investigation was launched into President Javier Milei's role in promoting a cryptocurrency that crashed.

The country's local Merval stocks index .MERV gained 5%.

Mexico's peso MXN= inched up 0.1%, after a preliminary estimate showed the economy likely grew 1.8% in January.

Oil exporter Colombia's peso COP= strengthened 1%, tracking higher crude prices. Chile's peso CLP= was flat.

On the equities front, Chile's IPSA index .SPIPSA and Brazil's Bovespa .BVSP were flat, while Mexican stocks .MXX and Colombia's COLCAP .COLCAP added 0.2% and 0.3%, respectively.

Elsewhere, Israel's shekel ILS= inched up 0.2%. Israel and Hamas will begin indirect negotiations on a second stage of the Gaza ceasefire deal, officials said as the Palestinian militant group said it would hand over more hostages, including the bodies of two children, this week.

Key Latin American stock indexes and currencies at 1946 GMT: