EMERGING MARKETS-Mexican peso up off biggest daily decline in nearly a month

* Brazil holiday expected to keep volumes low * Mexican peso up 04.%, carry trade potential eyed (New throughout, updates prices, market activity and comments) By Ambar Warrick and Susan Mathew April 21 (Reuters) - Mexico's peso rose on Wednesday, recovering from the previous day's slide, and stocks hit 2-1/2 year highs, while most other Latin American currencies traded sideways against a steady dollar. Trading in the region was slow due to a holiday in Brazil, Latam's largest economy. The peso rose 0.4%, recovering from its biggest daily decline in nearly a month, while the IPC stocks index rose 0.8%, marking its sixth session of gains in seven. Gains were led by a 5.5% jump in conglomerate Alfa after it reported results. Mexico's peso has benefited also from increased interest in carry trade, owing to its relatively higher yield, as well as reduced volatility in currency markets. The currency has nearly recouped all of its losses this year. Capital Economics' senior market economist Oliver Jones said he expects the focus in currency markets to increasingly turn to whether individual countries lead or lag in a global economic recovery from a COVID-19 pandemic induced slump, and the corresponding changes in their "risk-free" rates. Crude exporter Colombia's peso firmed 0.8%. The government on Wednesday said Colombia would restart some domestic flight next month. Focus in the Andean country turned to proposed tax reforms, which could spur spending cuts by the government if rejected. Ratings agency Fitch on Wednesday rated a Colombia's longer dated bonds in the last rung of investment grade. Chile's peso hovered around the highest level in more than three months, on strong prices for top export copper. Improving sentiment over copper demand has pushed prices of the red metal close to 10-year highs, helping the peso outpace its Latam peers this year. Latam stocks fell 0.6%, tracking steep losses across the emerging market space as risk-driven assets retreated. Argentina's peso retreated slightly amid uproar over movement curbs there to contain the pandemic. Central bank support helped contain losses in the currency. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1335.57 -0.89 MSCI LatAm 2396.37 -0.6 Mexico IPC 48932.17 0.83 Chile IPSA 4946.58 -0.59 Argentina MerVal 47029.94 0.289 Colombia COLCAP 1307.93 -0.26 Currencies Latest Daily % change Mexico peso 19.8940 0.33 Chile peso 698.4 -0.29 Colombia peso 3612.4 0.81 Peru sol 3.7087 -0.51 Argentina peso 93.0300 -0.05 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Kirsten Donovan and David Gregorio)