* MSCI LatAm stocks up 0.2%, FX flat

* Brazil's deficit widens to 10% of GDP Y/Y in June

* Chile's copper output rises, manufacturing production

declines

(Updates with afternoon trading levels)

By Utkarsh Hathi and Avinash P

July 31 (Reuters) - Most Latin American currencies weakened

against the dollar on Friday and equities in the resource-rich

region were mixed on easing metal prices, while investors

assessed developments in the Middle East.

MSCI's index tracking Latin American currencies

was muted, easing after strong gains in the

previous session.

The Colombian peso fell 0.7%, ahead of the central

bank's interest rate decision later in the day, with the bank

widely expected to raise rates to curb inflation.

Still, the peso was on track for its biggest monthly gain in

a decade, boosted by the victory of a conservative party in

June.

Rachel Ziemba, founder of Ziemba Insights, said the

Colombian peso's strength reflects optimism over the incoming

government, stronger investment prospects and higher oil prices,

with Colombian assets recovering after years of weakness.

Local stocks advanced 1.9%.

Regional stocks were a mixed bag, with the MSCI Latin

American equities gauge rising 0.2%, and heading

for monthly gains, as higher commodity prices supported

sentiment.

Ziemba said higher oil prices have benefited Latin American

oil exporters and helped shield some economies in the region

from the broader impact of the shock.

In Brazil, the real slipped 0.3%, while stocks were

trading 0.8% higher after a delayed market opening on Friday.

The gains were led by a 13% jump in lender Santander Brasil

after its parent Santander offered to

acquire the remaining stake it does not already own in the

Brazilian unit.

Brazil's overall budget deficit widened to nearly 10% of

gross domestic product (GDP) in the 12 months through June, data

showed, as higher interest costs weighed on the public finances.

"A deterioration on the fiscal (position) means that there

could be a delay in rates coming down, which means that it's

likely to be a headwind to growth," said Rohit Chopra, portfolio

manager at Lazard Asset Management.

In a potential boost for Brazil's left-wing party and

President Luiz Inácio Lula da Silva, the country's largest

right-wing party said on Friday it would stay neutral in

October's presidential election.

Meanwhile, in Argentina, President Javier Milei unveiled a

bill to reform the central bank's charter on Thursday, to

strengthen the bank's independence and restrict its ability to

finance government spending.

The Argentine peso gained 0.3%, while its

equities were flat.

Oil prices gained 1.1% as traders assessed shipping

disruptions in the Strait of Hormuz and attacks in the Red Sea

by Iran-backed Houthis.

Meanwhile, Chile's copper output rose in June, while

manufacturing production fell 3.2%. The Andean nation is the

world's largest copper producer.

The Chilean peso edged 0.3% lower, while its stocks

fell 0.6%, tracking lower copper prices.

Unemployment in Chile was recorded at 9.4% in the second

quarter, data showed, while Colombia's urban jobless rate fell

to 8% in June.

Following is a summary of key Latin American stock indexes

and currencies:

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1662.67 6.38

MSCI LatAm 3101.15 0.24

Brazil Bovespa 178546.19 0.78

Mexico IPC 67155.37 -0.2

Chile IPSA 10965.66 -0.59

Argentina Merval 3304245.3 -0.02

7

Colombia COLCAP 2386.33 1.87

Currencies Latest Daily %

change

Brazil real 5.0725 -0.27

Mexico peso 17.316 0.04

Chile peso 928.13 -0.27

Colombia peso 3151.68 -0.74

Peru sol 3.3895 -0.17

Argentina peso (interbank) 1485 0.30

Argentina peso (parallel) 1540 1.62