EMERGING MARKETS-Argentina markets outshine LatAm peers this week on pledged US support

By Nikhil Sharma

Sept 26 (Reuters) - Latin American assets edged up on Friday, eyeing a mixed end to the week largely dominated by Argentina, where markets sprang to life after the revelation of the White House's rescue plan for the economy.

Argentina led the news cycle with investors making bullish bets after the U.S. pledged unwavering support and disclosed an ongoing negotiation of a $20 billion swap line with the local central bank.

The peso currency ARS=RASL edged up 0.15% to a near one-month high on Friday, taking its weekly advance to over 9% as it recovered all its losses from President Javier Milei's legislative setback in early September. The market rout last week triggered the central bank intervention.

Stocks in Buenos Aires .MERV jumped 2% and were up 6.5% for the week so far - the biggest weekly jump since May 12.

Meanwhile, government bonds cooled after a gigantic leap earlier this week.

But the rally will be tested ahead of next month's midterm elections, where another flop show by Milei's party could jeopardize progress on his austerity agenda and push markets back into precarious territory.

MSCI's index for Latin American currencies .MILA00000CUS edged up 0.1%, but was down 0.26% for the week as it remained pressured by the U.S. dollar after data this week showed resilience in the U.S. economy.

The dollar index =USD was up 0.6% for the week - its biggest gain since late July.

A regional equities gauge .MILA00000PUS finished the week largely flat. Peruvian equities .MXNUAMPESCPGPE were among the best performers alongside Argentina, up 2.7% week-to-date.

Mexican equities .MXX were up 0.5%, taking weekly gains to 1.4%, bolstered by an expected quarter-point interest rate cut by the central bank on Thursday as it balanced an unwieldy act of stimulating the economy against sticky inflation that threatens to breach the target rate.

The expected cut weighed on the local peso MXN=, set for modest weekly losses. For the day, it was up 0.4%.

Brazil's real BRL= advanced 0.4%, but was set for a weekly loss. Latin America's largest economy posted a smaller-than-expected current account deficit in August.

For the year, the currency was up 13.4% - among the top performers in its peer group, benefiting from a wider interest-rate differential with the United States. Brazil's central bank last week kept rates at a near two-decade high of 15%.

"We still see a relatively resilient economy and at the same time elevated inflation, and think that the market pricing of (Fed) cuts is way too aggressive," said Olga Yangol, head of EM Research and Strategy at Credit Agricole.

"The implication is that in this context, EM currencies that offer attractive carry are likely to stand out."

Sao Paulo's main stock index .BVSP edged up 0.2% but was set for a weekly decline.

The Colombian peso COP= extended its decline to the fourth session, down 0.4%, the longest in two months and approached its first weekly decline in nine. Colombian stocks .COLCAP fared better, nearing a weekly rise.

Colombia's central bank is expected to hold the benchmark rate next week and continue this trend for the rest of the year.

Chile's peso CLP= neared a weekly loss and the Santiago stock index .SPIPSA was up 0.6% for the week.

Key Latin American stock indexes and currencies: