EMERGING MARKETS-Colombian peso leads gains in LatAm currencies ahead of central bank decision

By Niket Nishant

Dec 19 (Reuters) - Latin American currencies rose on Friday, led by gains in the Colombian peso COP= as investors awaited the central bank's final meeting of the year, where it is expected to keep interest rates unchanged.

The peso gained nearly 1% against the dollar. Elevated interest rates tend to boost the appeal of a currency, particularly when a weaker U.S. dollar sends investors hunting for higher-yielding opportunities.

The Colombian stock benchmark .COLCAP inched 0.3% higher, but was on track for its biggest weekly loss since May.

The MSCI index tracking regional currencies .MILA00000CUS rose 0.1%, while the corresponding equities gauge .MILA00000PUS rose 0.4%.

The moves cap a volatile week for the assets, which were buffeted by a heavy slate of monetary policy decisions and domestic political factors.

Tensions between the U.S. and Venezuela are also looming over the region, with any escalation likely to ripple through markets. Regional heavyweights Brazil and Mexico have called for restraint, but their stance risks stoking Washington's ire.

POLITICS, ECONOMIC DATA DRIVE SENTIMENT

In Brazil, domestic political risks have come to the fore in recent weeks. President Luiz Inacio Lula da Silva said on Thursday he was "sensing" that interest rates could start to come down soon, but central bank chief Gabriel Galipolo said policymakers would stick to a data-dependent approach.

Lula also said he will veto a bill passed by the country's Congress to cut former President Jair Bolsonaro's 27-year prison sentence.

The real BRL= climbed 0.3% on Friday, but was poised to end the week 1.6% lower. The Bovespa index .BVSP gained 0.5% on Friday, after data showed that foreign direct investment inflows beat expectations in November.

Argentine equities .MERV rose 0.5%, a day after data showed that the country's trade surplus in November was above expectations.

The unemployment rate also dropped to 6.6% in the third quarter from 6.9% a year earlier. The peso ARS=RASL was 0.1% lower.

Chilean stocks jumped 1.1%, thanks in part to the price of copper rallying to a near record high. The metal, widely used in power, construction and manufacturing, is Chile's top export.

"Sentiment on Argentinian assets remains constructive, while Chile continues to be the preferred Andean market. However, copper prices remain the main risk for the region," analysts at BofA Global Research wrote in a note.

Meanwhile, Mexico's stock benchmark .MXX and the local peso MXN= were largely unchanged. The central bank lowered interest rates by 25 basis points on Thursday.

Key Latin American stock indexes and currencies: