EMERGING MARKETS-Latam markets recover ground tracking higher commodity prices

Updates to mid-session trading

By Purvi Agarwal and Johann M Cherian

Feb 20 (Reuters) - Most currencies in resource-rich Latin America edged higher on Thursday, with Chile's peso in the lead, tracking higher commodity prices, while investors also assessed the minutes from the Mexican central bank's latest meeting.

MSCI's index tracking Latam currencies .MILA00000CUS edged up 0.06%, against a weakening dollar, while the stocks index .MILA00000PUS was 0.25% higher.

Markets bounced back after logging losses a day earlier after minutes from the U.S. Federal Reserve's meeting that showed policymakers were concerned that President Donald Trump's initial policy proposals would add to inflation pressures, implying interest rates could remain higher for longer.

A depreciating greenback made commodities cheaper for holders of other currencies, including those of copper producers Chile and Peru. The Chile peso CLP= firmed 0.9% and was set to snap three sessions of losses, tracking higher prices of the red metal. Peru's sol PEN= gained 0.5%.

Brazil's real BRL= strengthened 0.3%, tracking higher iron ore prices, while Colombia's peso COL= appreciated 0.6%, tracking higher crude prices.

"What we are seeing is perhaps some sort of adjustment of the volatile period that we saw in previous weeks," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

Mexico's peso MXN= appreciated 0.6%. Yield on the 10-year Mexican bond MX10YT=RR dipped 2 basis points after Banxico said that it might continue cutting the benchmark interest rate and could "consider adjusting it in similar magnitudes" to the 50 basis points reduction.

Early jitters around Trump's tariff plans, with his addition of lumber to his exhaustive list, receded somewhat, but the end of his 30-day reprieve for Mexico and Canada loomed large.

"The start of next month when apparently the tariffs on Mexico will start to be imposed, that's going to be when we will probably see more uncertainty than downside forces," said Pantheon's Abadia.

"But the good news is that we have a relatively attractive carry in most of the Latam currencies. That is going to perhaps prevent a sharp deterioration."

Mexico, Thailand and Malaysia face the highest risk due to tariff gaps and U.S. trade reliance, according to the Institute of International Finance.

Equity indexes in the region were mixed, with Argentina's Merval index .MERV flat, while Chile's bourse .SPIPSA gained 0.6%.

Brazil's .BVSP was muted, although losses were limited by a 2.9% gain in Vale VALE3.SA after the miner announced fresh remuneration to shareholders through dividends and a share buyback.

Colombia's COLCAP .COLCAP added 0.6% to continue trading at levels last seen in April 2022.

Argentine President Javier Milei will likely discuss the recent tariff hikes on U.S. imports of steel and aluminum in an upcoming visit to Washington.

Blockchain researchers said that around $99 million worth of cryptocurrency was withdrawn from the marketplace of a coin that was promoted by Milei late on February 14 only to crash soon afterwards.

Markets also kept an eye on developments in the Russia-Ukraine peace talks, after a report said the U.S. is refusing to co-sponsor a draft U.N. resolution that backs Ukraine's territorial integrity and again demands Russia withdraw its troops.

Ukraine's GDP warrant fell UA130392989= by nearly 3 cents, the most since August 2023, while bonds traded down nearly 3.5 cents, the most since they were restructured late last year, before paring.

Key Latin American stock indexes and currencies at 1942 GMT: