EMERGING MARKETS-Latam FX hits all-time high, with focus on Iran-Israel tensions, cenbanks

By Nikhil Sharma

June 16 (Reuters) - Latin American currencies hit a record high on Monday and equities surged despite concerns about the intensifying Iran-Israel conflict, while investors focused on key interest rate decisions from the region.

The MSCI's index for Latin American currencies index .MILA00000CUS rose 0.6% to move past a record high last hit in July 2011.

Meanwhile, a gauge for the regional equities .MILA00000PUS shot up 1.9%, set for its best single-day move in more than a month.

The tensions in the Middle East showed no signs of easing on Monday when Iranian missiles struck Israel's Tel Aviv and the port city of Haifa before dawn, killing at least eight people and destroying homes.

The attack prompted Israeli Prime Minister Benjamin Netanyahu to warn that his country was on its way to eliminating "threats" from nuclear and missile facilities in Iran

Markets, however, showed a surprising resilience against the raging tensions, with Israel's blue-chip index .TA35 rising 1.7% and its broader TA-125 index .TA125 surging about 2.4%.

The currency shekel ILS= strengthened 3.2% against the dollar on Monday, reversing most losses made last week in the run-up to the conflict.

Meanwhile, international bonds across the Middle East region were steady for the day.

The U.S. dollar =USD came under pressure, down 0.4% in volatile trading, as investors monitored the Middle East conflict and braced for the U.S. Federal Reserve's rate decision on Wednesday, expected to keep rates on hold.

However, a potential dovish Fed outlook could further weaken the greenback, which has already been grappling with selling pressures as investors become increasingly disillusioned with its safe-haven appeal.

Focus was also on the Central Bank of Brazil's rate verdict on Wednesday, amid expectations that the central bank will keep rates steady at 14.75%, its highest in nearly two decades.

"No policy rate changes are generally anticipated. For Brazil's central bank, the subdued inflation and retail sales data of last week, and the strength in the BRL, have effectively shut the door on one final rate hike," analysts at Societe Generale said in a note.

But Monday's fresh data highlighting a stronger-than-expected economic activity in April kept some room for a rate hike on Wednesday.

Brazilian real BRL= jumped 0.7% against the dollar to a fresh eight-month high, while the local equity index .BVSP surged 1.6% to a near three-week high.

Additionally, a 'hold' decision is also widely expected from Chile's central bank later this week. The Andean nation's peso CLP= rose 0.3% for the day, while its main stock index .SPIPSA rose 0.2%.

In Mexico, the local peso MXN= jumped 0.6% and the benchmark equity index .MXX added 0.5%. Investors were expecting a meeting between President Claudia Sheinbaum and U.S. President Donald Trump at the G7 summit in Canada to ameliorate strained trade ties following Washington's unpredictable tariff action.

The Colombian peso COP= jumped 0.6% on Monday ahead of April's trade data later in the day.

Despite the day's gains, the note, however, remains exposed to growing concerns about the country's deteriorating public finances. The benchmark index .COLCAP dipped 0.2%.

Later this week, the government will present a tax reform bill to Congress to raise 19 trillion pesos ($4.53 billion) more to help fund the 2026 budget, as per government sources.

In Buenos Aires, the main stock index .MERV was a drag and fell 2.7%, following sharp losses in the prior week.

Peruvian currency, sol PEN= rose 0.4% after Sunday's data revealed an economic expansion of 1.40% year-over-year in April, mostly driven by the mining sector.

Key Latin American stock indexes and currencies: