* LatAm stocks rise 1.1%, FX up 0.3%

* US, Mexico resume USMCA trade talks

* Mexican economy likely expanded 1.7% in June Y/Y

* Colombian peso hovers around seven-year high

(Updates with afternoon trading levels)

By Utkarsh Hathi and Shashwat Chauhan

July 21 (Reuters) - Most Latin American currencies

strengthened against the dollar on Tuesday, led by those of

oil-exporting nations as the Middle East conflict showed no

signs of letting up, while regional stocks were also broadly

higher.

Colombia's peso led gains in the region, up 1.1%,

hovering close to its highest in around seven years. Mexico's

peso climbed 0.2%.

Crude oil prices gained more than 2% to hit five-week highs

on worries that energy supply disruptions could worsen in the

Middle East due to more attacks between the U.S. and Iran and a

threatened naval blockade of Saudi Arabia by Yemen's Houthis.

"This rebound in oil prices has reintroduced uncertainty

regarding the convergence of inflation toward target levels over

the relevant policy horizon, not to mention the continued

uncertainty surrounding global trade tariffs," Rabobank analysts

said in a note.

Meanwhile, local data showed Mexico's economy likely

expanded 1.7% in June from the same month a year earlier, while

retail sales fell 0.6% in May from April.

The U.S. and Mexican trade negotiators launched a third

round of bilateral talks to try to revise the North American

trade agreement, just as U.S. President Donald Trump said he

would impose new duties on Canada.

Brazil's real rose 0.4% against the dollar, marking a

second straight day of gains, even though it hovered near its

one-month lows.

"Given expectations of a narrower interest-rate differential

between domestic and international markets throughout 2026,

combined with a potential recovery of the U.S. dollar globally,

we estimate the exchange rate will reach BRL 5.35 per U.S.

dollar by the end of 2026," Rabobank analysts said.

The dollar has appreciated against most global currencies

recently as investors expect interest-rate hikes by the U.S.

Federal Reserve this year amid the oil spike, a sharp turnaround

from expectations of rate cuts seen before the Iran war.

In emerging markets, the Colombian peso has strongly

outperformed so far this month as the victory of right-wing

President-elect Abelardo de la Espriella fueled expectations of

a more business-friendly administration and reduced political

uncertainty.

MSCI's index for regional currencies edged

0.3% higher, while regional stocks added 1.1%.

Most regional bourses were higher, with Argentina's Merval

jumping 1.8% and Mexican stocks adding 0.9%.

Key Latin American stock indexes and currencies:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1652.46 2.2

MSCI LatAm 3030.94 1.1

Brazil Bovespa 173325.65 -0.03

Mexico IPC 66701.89 0.88

Chile IPSA 10954.26 0.51

Argentina MerVal 3281675.51 1.8

Colombia COLCAP 2301.34 0.13

Currencies Latest Daily %

change

Brazil real 5.0717 0.35

Mexico peso 17.3925 0.18

Chile peso 935 -0.15

Colombia peso 3216.5 1.08

Peru sol 3.3945 -0.17

Argentina peso (interbank) 1,477.50 0.27

Argentina peso (parallel) 1,525.00 0.97