* MSCI LatAm stocks and FX down 0.2% each

* Lula leads Bolsonaro but gap narrows - Poll

* Chile approves reform to spur growth

* Brazil cenbank rate decision later in the day

(Updates with late afternoon trading)

By Utkarsh Hathi and Avinash P

Aug 5 (Reuters) - Latin American currencies were higher

against the dollar on Wednesday andmost equities remained lower

despite firmer commodity prices, while investors awaited

Brazil's central bank decision.

MSCI's index tracking Latin American equities

and its regional currencies counterpart

dipped 0.2% each.

The U.S. dollar index weakened 0.2% and hovered at

six-week lows, on hopes of a resolution in the U.S.-Iran

conflict, while oil prices fell below $80 per barrel.

Among currencies in the region, the Brazilian real

and its equities were little changed ahead of the

central bank rate decision later in the day, which is widely

expected to deliver a 25-basis-point rate cut.

Political developments in the country are also in the

spotlight, with the right-wing Senator Flavio Bolsonaro

narrowing the gap with President Luiz Inacio Lula da Silva ahead

of the October election, a poll showed.

Recent conservative electoral wins in Colombia and Peru have

reinforced investor expectations of more market-friendly policy

settings in parts of the region, though the impact on assets has

varied by country.

"The recent shift toward more market-oriented governments in

Latin America reflects a renewed emphasis on fiscal orthodoxy,"

said Malcolm Dorson, head of EM Strategy at Global X.

"The key distinction is not simply left versus right, but

whether governments maintain macroeconomic credibility.

Countries that combine fiscal discipline, sound monetary

institutions, and openness to trade and investment tend to

attract capital, lower financing costs, and generate more

sustainable growth."

Separately, overall business activity in the region's

largest economy contracted in July, data showed.

The central bank of Mexico is also expected to hold rates

steady when it meets on Thursday, a Reuters poll of analysts

showed.

The Mexican peso strengthened 0.1%, and its stocks

fell 0.6%, while losses were cushioned by a 1.7% advance

in Grupo Mexico.

Meanwhile the Chilean Congress approved a sweeping reform

package on Tuesday to revive growth in the world's largest

copper producer through corporate tax cuts and investment

incentives.

Chile's peso dipped 0.2%, while its equities

climbed 1.5%, tracking firmer copper prices.

Minutes of the Chilean central bank's July meeting showed

policymakers considered keeping rates unchanged as "the only

plausible option".

The Colombian central bank lifted its 2027 inflation

forecast to 4.3% on Tuesday from 3.7% previously. Colombia's

peso advanced 0.7%, extending gains after a 1% jump in

the previous session.

Separately, Argentina agreed a deal with maritime pilots on

Tuesday, clearing the way for shipping to resume after a

stoppage that had halted grain exports.

Argentina's benchmark declined 0.8%, and its

currency firmed.

Key Latin American stock indexes and currencies

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1687.27 2.18

MSCI LatAm 3079.78 -0.15

Brazil Bovespa 177841.87 -0.03

Mexico IPC 66448.75 -0.58

Chile IPSA 11166.1 1.54

Argentina Merval 3163920.9 -0.786

8

Colombia COLCAP 2356.71 -0.76

Currencies Latest Daily %

change

Brazil real 5.1263 0.03

Mexico peso 17.2371 0.1

Chile peso 912.07 -0.17

Colombia peso 3171.82 0.7

Peru sol 3.3832 0.3

Argentina peso (interbank) 1496 0.07

Argentina peso (parallel) 1520 1.64