EMERGING MARKETS-LatAm stocks mixed, but weekly gains hold; Argentina peso holds at record lows

By Pranav Kashyap

Sept 19 (Reuters) - Latin American stocks were mixed on Friday, but were set for robust weekly gains, while currencies wavered, with Argentina's peso holding the flatline at record lows.

Argentine markets sold off this week, with stocks .MERV sliding over 2%, marking losses in six of the past seven weeks, while the peso ARS=RASL teetered toward a 1.4% drop.

On the day, the peso was flat at a record low, while stocks crept up 0.5%.

The central bank was forced to unleash its biggest single-day dollar intervention since April - selling $379 million on Thursday alone - to prop up the currency. That followed a $53 million sale on Wednesday, pushing the two-day total past $430 million and raising alarms over dwindling reserves, now hovering at a provisional $39.4 billion.

The aggressive interventions have reignited fears about Argentina's ability to meet looming debt payments. Political turbulence continued to weigh on investors after recent legislative setbacks for President Javier Milei's austerity agenda have rattled investors ahead of October's midterm elections, where control of Congress hangs in the balance.

"If reserves are being used to defend the effects, it's limited and you start to see correlations in all asset classes," said Alejandro Cuadrado, managing director, global head FX & LatAm strategy at BBVA.

"What's at stake is the midterms and at some point there has been an excess of expectations in the performance capacity of the administration into those elections."

On a broad front, Latin American markets kept their winning streak alive this week, with equities .MILA00000PUS on track for a seventh straight weekly gain - the longest run in over two years, boosted by gains in the run-up to the Federal Reserve rate decision.

Meanwhile, a surprise bounce in the dollar post the Fed rate cut pressured EM currencies, cutting weekly gains from an index tracking regional currencies .MILA00000CUS. It was still up over 1% though.

Fed Chair Jerome Powell framed the cut as a risk-management step rather than the start of a full-blown easing cycle—disappointing investors who had expected a more dovish stance and leaving them in suspense over the extent of Fed easing.

On the day, the LatAm equity index fell 0.2% and the currency index was down 0.3%.

Brazil's real BRL= was just off an over one-year high touched on Thursday. The currency was on course to log its third straight week of gains against the dollar, as investors continued to take advantage of Brazil's 15% rate. The central bank this week left borrowing costs unchanged, parked at a near 20-year high and hinted a prolonged pause due to sticky inflation.

Meanwhile Brazilian stocks rose .BVSP on the day and were set for an over 2% advance this week.

Peruvian stocks .MXNUAMPESCPGPE nosedived on Thursday, logging their worst single-day drop in over five months, after Congress approved a controversial measure allowing partial withdrawals from private pension funds. The move, aimed at jumpstarting the economy, sparked fears that millions could be left without retirement savings.

On the day, the sol PEN= held steady, while equities came off a one-week low as investors weighed the long-term risks of short-term stimulus.

Colombian stocks .COLCAP surged 1.9%, gaining for the first time after three sessions of losses. The jump puts the index on course for its best day in nearly two months.

Mexican stocks slipped 0.1%, while the peso was down 0.2%. Fresh data showed the country's private spending increased 1.2% in the second quarter.

Key Latin American stock indexes and currencies: