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

By Niket Nishant and Pranav Kashyap

Dec 30 (Reuters) - Brazil's real BRL= outperformed its Latin American peers in the year's penultimate session on Tuesday, bolstered by data showing unemployment has fallen to its lowest level since 2012.

The surprisingly tight labor market, holding up even under high interest rates, could strengthen the central bank's case for keeping policy steady, even as President Luiz Inacio Lula da Silva has suggested he "could smell" rate cuts 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 0.7%.

Among regional peers, the Chile peso CLP= jumped up 1.46% 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 0.9%, while the equities gauge .MILA00000PUS gained 0.79%. 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.

Regional markets are also being driven by sharp moves in commodity prices. Peru's Lima bourse .MXNUAMPESCPGPE rose 1.22% after prices of gold, one of its top exports, rebounded.

Colombian stocks .COLCAP fell 1.5%, poised to snap a five-session winning streak and set for its steepest daily fall in over a month. This comes a day after the government said it will raise minimum wage by nearly 23% next year. The Colombian peso dropped 1.4% to an over one-week low.

J.P. Morgan and Goldman Sachs now see Colombia's central bank turning decisively more hawkish after the outsized minimum-wage increase, arguing the shock will ripple through inflation and the broader economy. Both banks say the move raises the odds Banrep abandons a wait-and-see stance and pivots to a more aggressive, front-loaded tightening cycle in the months ahead.

Meanwhile, the Argentine stock benchmark .MERV slipped 0.1%, while the peso ARS=RASL was up 0.38% against the dollar.

Key Latin American stock indexes and currencies: