EMERGING MARKETS-Brazil's real leads LatAm currencies as unemployment hits lowest since 2012

By Niket Nishant

Dec 30 (Reuters) - Brazil's real BRL= gained in the penultimate trading session of the year, leading the advance among Latin American currencies after data on Tuesday showed that unemployment fell to its lowest level since 2012.

The tight labor market, despite high interest rates, could give the central bank more scope to keep rates unchanged even as President Luiz Inacio Lula da Silva has said he "could smell" reductions coming soon.

The unemployment rate in the country was 5.2% in the three months to November, compared with 5.4% that economists had expected.

Signs that the job market is holding up also buoyed equities, with the Bovespa index .BVSP up 0.8%. Shares of metals and mining company Vale VALE3.SA and financial firm Itau Unibanco ITUB4.SA rose 0.7% and 1.1%, respectively.

Among regional peers, the Chile peso CLP= firmed up 0.6% against the dollar. Jobless rate in the quarter through November was 8.4%, compared with the 8.2% that economists polled by Reuters had expected.

The MSCI index tracking Latin American currencies .MILA00000CUS rose 0.8%, while the equities gauge .MILA00000PUS gained 1%. The moves have partly been amplified by thin holiday liquidity.

ELEVATED EXPECTATIONS FOR 2026

Latin American stocks are cruising toward their best year since 2009, and while price swings in the final two trading sessions of the year are unlikely to dent their appeal, analysts say expectations are high heading into next year.

The outlook for currencies is also bright, with the dollar expected to weaken following rate cuts by the Federal Reserve.

However, political factors could complicate expectations, with several countries, including Brazil and Colombia, heading toward elections in 2026.

"Political risk from elections in Brazil and Chile will be present, and U.S.-Mexico trading relations are far from settled. Still, we see the region's currencies staying supported," according to economists at ING.

Regional markets are also being driven by sharp moves in commodity prices. Peru's Lima bourse .MXNUAMPESCPGPE rose 0.5% after prices of gold, one of its top exports, rebounded.

The Mexican peso MXN= was flat ahead of the release of the minutes from the Fed's December meeting, which could provide fresh clarity on the path for U.S. rate cuts.

Colombian stocks .COLCAP fell 0.7%, poised to snap a five-session winning streak, a day after the government said it will raise minimum wage by nearly 23% next year.

President Gustavo Petro acknowledged that the measure could be inflationary.

Meanwhile, the Argentine stock benchmark .MERV rose 0.7%, while the peso ARS=RASL was up 0.1% against the dollar.

Key Latin American stock indexes and currencies: