EMERGING MARKETS-Latam FX rises after US economic worries weigh on dollar; focus on trade

By Ankita Yadav and Johann M Cherian

Aug 1 (Reuters) - Most Latin American currencies firmed on Friday as the dollar tumbled after signs of a cooling U.S. labor market complicated the Federal Reserve's policy path, while investors also scrutinized the latest U.S. tariff comments.

U.S. job growth slowed more than expected in July while the prior month's figures were revised sharply lower, data showed, indicating that the labor market could be showing signs of stalling, adding to some hopes of an interest rate cut in September.

"A higher likelihood of lower U.S. rates can make the dollar relatively less attractive and that is a very favorable headwind for Latin American currencies; we are seeing quite a bit of relief" said Pablo Riveroll, fund manager & global head of equities research at Schroders.

The dollar index =USD edged down 0.9% following the data, boosting most emerging market currencies. The MSCI index tracking Latin America currencies .MILA00000CUS was up 0.4%, set for marginal gains this week.

Still, a recovery in the dollar this week after a U.S.-European Union trade deal hit the euro had stalled the momentum in emerging markets, with broader indexes tracking developing market stocks .MSCIEF and currencies .MIEM00000CUS heading for weekly declines.

Meanwhile, investors globally were also grappling with a fresh set of U.S. tariffs imposed on dozens of trade partners, that will come into effect on August 7.

In Latin America, Brazil's real BRL= was up 0.8% and was on track for its biggest one-week rise in over a month as the country secured exemptions from 50% U.S. tariffs on key exports.

The local government expects to announce next week measures of a contingency plan it has been preparing to help businesses to cope with the levies.

"We're partly getting used to these deadlines that can get extended... more relevant are the items that were exempted, there was initially a very aggressive stance against Brazil and now when we saw the details there were lots of key exports exempted," said Riveroll.

On the flip side, Mexico's peso MXN= was down 0.4%, a day after Trump extended the tariff negotiation deadline for Mexico by 90 days, as investors priced in a potential interest rate cut by the local central bank next week. The peso was headed for a weekly decline, an outlier among peers.

Colombia's peso COP= strengthened 1.2%, the most among peers. The currency was set for a weekly gain after three weeks of declines.

Chile's currency CLP= followed with a 0.3% gain. Economic activity rose at an annualized 3.1% in June, data showed, missing estimates.

Argentina's peso ARS=RASL was up 0.9% after the International Monetary Fund board completed its first review of the $20 billion program with Argentina and approved a disbursement of about $2 billion in funds. Stocks .MERV, however, declined 1.8%.

Equities in the region were broadly lower, with ones in Colombia .COLCAP and Mexico .MXX down 1.2% and 0.6% respectively.

Meanwhile, El Salvador's dollar bonds were marginally lower after the ruling party passed a bill to overhaul how elections are run in the Central American nation, opening the door for President Nayib Bukele to serve another term.

Key Latin American stock indexes and currencies: