EMERGING MARKETS-Latam stocks, FX set for weekly gains; Turkey in focus

By Pranav Kashyap and Johann M Cherian

April 17 (Reuters) - Indexes tracking Latin American currencies and stocks were poised for weekly gains on Thursday, as investors closely monitored trade negotiations in Washington, while markets absorbed the Turkish central bank's unexpected rate hike.

MSCI's Latam stocks gauge .MILA00000PUS edged up 0.26%, whereas the currency index .MILA00000CUS ascended by 0.38% against the dollar.

Both indexes were on track for weekly gains, marking the stock index's first ascent in four weeks and the currency index's first in five, as investor sentiment steadied after President Donald Trump temporarily suspended steep tariffs impacting global economies last week.

Markets were also monitoring negotiations between Japan and the United States that Trump lauded as productive, while Italian Prime Minister Giorgia Meloni was also headed to the White House for a meeting.

However, a fierce tariff-impasse between China and Washington prevailed that analysts have said could dent demand globally, especially for commodities such as industrial metals and crude oil - key sources of export revenue for Latin American economies.

Mexico's peso MXN= firmed 0.44%, last at 19.8 against the dollar and was on track for its biggest weekly rise since January.

Trump said he had a "very productive" conversation with Mexican President Claudia Sheinbaum, on his Truth Social platform. The latest items to be included in negotiations involved a historical water-sharing treaty between the two neighbors and the trade of agricultural produce.

The country's assets outperformed regional counterparts on a monthly basis, with analysts attributing this to Sheinbaum's steadfast negotiating stance with President Trump, bolstering investor confidence.

Elsewhere, the Turkish lira TRYTOM=D3 rose by 0.2% in highly choppy trading after the central bank's surprise hike of its key interest rate by 350 basis points to 46%, reversing an easing cycle. The local stocks index .XU100 was last up 1.5%, while rate-sensitive banks .XUBANK was flat.

"The move would formalize the tightening delivered last month and suggests that policymakers have become more concerned about upside risks to inflation," said Nicholas Farr, emerging Europe economist at Capital Economics.

"The statement today highlighted the risks from a weaker lira, and that policymakers would closely monitor capital flows amid the current uncertainty around US trade protectionism."

The institution's move followed market turbulence sparked by the arrest of Istanbul's mayor last month that weighed on Turkish on worries of political instability. The lira had plunging to a record low at one point, prompting the central bank to step in late March to stabilize the currency.

In Latin America, Brazil's real BRL= was flat, while the local Bovespa .BVSP edged up 0.4%, in a session marked by the expiration of stock options.

The week was also marked by Argentina lifting years-long capital controls that resulted in the peso ARS=RASL witnessing sharp declines before recovering on Wednesday, although President Javier Milei had ruled out any intervention.

Furthermore, the country posted an energy trade surplus of $527 million in March.

In Ecuador, President Daniel Noboa appointed Sariha Belen Moya as the new economy minister, succeeding Luis Alberto Jaramillo. The country's international bonds XS2214237807=TE, XS2214238441=TE, XS2214239175=TE added about 0.6-1 cents on the dollar having rallied earlier in the week.

Bourses in Peru, Argentina, Colombia and Mexico were closed on Thursday on account of a public holiday.

Key Latin American stock indexes and currencies: