*

Chile economic activity below expectations

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Brazilian real hits over two-year low

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Safe haven assets such as U.S. dollar on the rise

(Updated at 3:31 p.m. ET/ 1931 GMT)

By Lisa Pauline Mattackal and Shashwat Chauhan

Aug 1 (Reuters) -

Most Latin American currencies slipped on Thursday as

investors shied away from risky assets amid elevated

geopolitical worries, boosting traditional safe-haven assets

such as the U.S. dollar.

Global markets were on edge after Hamas leader

Ismail Haniyeh

was assassinated in the Iranian capital Tehran early on

Wednesday morning, an attack that drew threats of revenge on

Israel and fuelled further concern that the conflict in Gaza was

turning into a wider Middle East war.

Traditional safe-haven assets such as the greenback

and the Swiss franc appreciated, while most

currencies in Latin America, generally considered as risky, fell

with MSCI's index for the region down 1.2%.

Brazil's real led losses, down 1.5% to 5.73 per

dollar, hitting its lowest level in over two years, a day after

its central bank held interest rates and warned "more vigilance"

was necessary due to worsening inflation expectations and recent

market swings.

"The unquestionable deterioration in the inflation outlook

pushed Copom to escalate the hawkish tone, although not yet

indicating an imminent interest rate hike," analysts at Citi

wrote in a note.

Chile's peso reversed initial gains and was last down

1%. Chile's central bank on Wednesday had held its benchmark

interest rate at 5.75% in a unanimous vote, in line with

traders' expectations and marking the first time the bank has

held the rate since the easing cycle began.

Separately, the country's

IMACEC economic activity index

grew 0.1% in June compared with a year earlier, well below

the 1.7% growth expected by economists polled by Reuters.

Mexico's peso dropped and Colombia's peso

shed 0.9% each.

Peru's sol fared better than most, down 0.5%

against the dollar. Data showed

annual inflation

in the country slowed to 2.13% in July even as consumer

prices, mainly for food and transportation, rose for the second

consecutive month.

The dollar's gains and weaker global manufacturing data,

notably in China, further dented gains for emerging markets

assets after the U.S. Federal Reserve signaled on Wednesday they

could cut rates in September.

Emerging markets were somewhat bolstered in July on hopes

for easier policy in the U.S., but were hit as a global equity

selloff, resurgent geopolitical worries and signs of softening

economic growth in economies like China have weighed.

On the equities front, MSCI's index of Latin American stocks

shed 1.9% following an over 1% jump in the last

session. Most local bourses fell, in-line with a bruising

selloff on Wall Street.

Colombia's EcoPetrol lost 2.3% after Occidental

Petroleum ( OXY ) said the Colombian company will not buy a

stake in shale oil producer CrownRock after reporting last month

they were in talks for a potential stake sale.

Elsewhere in Latin America, tensions in Venezuela remained

high amid protests over the results of its presidential

election.

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exchange, say sources

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1086.01 0.11

MSCI LatAm 2156.83 -1.90

Brazil Bovespa 127257.81 -0.31

Mexico IPC 52352.05 -1.4

Chile IPSA 6389.61 -0.79

Argentina Merval 1500945.0 -0.454

7

Colombia COLCAP 1337.21 -0.63

Brazil real 5.7388 -1.57

Mexico peso 18.776 -0.95

Chile peso 951.9 -1

Colombia peso 4082.57 -0.86

Peru sol 3.7385 -0.49

Argentina peso (interbank) 931.5 -0.053676865

Argentina peso (parallel) 1360 0.735294118