• Brazil's real hits two-week high
• Weak copper prices weigh on Peru, Chile's FX
• Mexico, Peru policy decision due on Thursday
• Latam stocks up 1%, FX up 0.5%

Aug 7 (Reuters) - The Mexican peso jumped against the dollar on Wednesday, a day ahead of key inflation data and a monetary policy decision, with most Latin America assets continuing to recover lost ground after a recent sell-off intensified at the start of the week.

Mexico's currency gained over 1%, stabilizing after a four-day decline, recovering from a near two-year low touched on Monday.

As a key beneficiary of yen-funded carry trades, where investors borrowed cheaply in the Japanese currency to invest in higher-yielding ones, the peso was one of the worst hit as yen gains saw many of those trades unwind. Despite the day's gains, the peso remains around lows last seen in March 2023.

The country's inflation figures are due on Thursday, right ahead of a central bank decision wherein the interest rate is expected to be held steady at 11% amid price pressures and the peso's recent weakness.

"The good news for Mexico is we expect the U.S. Federal Reserve to cut rates in September, easing pressure on the currency," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

"But as a bellwether for EM currencies, any bad news in terms of a risk-off environment will hurt it."

The MSCI currencies index (.MILA00000CUS) , opens new tab edged up to a near one-week high, with Brazil's real also gaining 0.7% and hitting a two-week high intraday.

Benchmark stock indexes in Brazil (.BVSP) , opens new tab and Mexico (.MXX) , opens new tab gained 0.4% each, with the MSCI stocks gauge (.MILA00000PUS) , opens new tab also in recovery to hit a near one-week high. Meanwhile, Argentina's stocks (.MERV) , opens new tab reversed early course and fell 0.6%.

The equity market in Colombia was closed for a public holiday.

Meanwhile, a near 2% drop in copper prices hit top exporter Peru's sol , down 0.7%, and kept the Chilean peso around the flat line.

Peru's monetary policy decision is also due on Thursday. In July, its central bank held interest rate in a second consecutive monthly pause, citing stubborn core inflation.

Some of the other economic data on investors' radar for the week included Chile, Colombia and Brazil's respective inflation data and Mexico's industrial output.

Elsewhere, El Salvador's sovereign bonds rallied a day after the International Monetary Fund said the two sides had made headway in talks toward a fund-supported loan program.

Nigeria's central bank sold $876.26 million at 1,495 naira to the dollar at its first retail auction for end users, firmer than where the currency is trading at on the official market.

Key Latin American stock indexes and currencies at 1903 GMT:

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https://www.reuters.com/markets/latin-american-stocks-extend-recovery-mexican-peso-snaps-four-day-losing-streak-2024-08-07/