EMERGING MARKETS-Rallying commodities lift Latam FX; Brazil's real lifts off 6-month lows

* Brazil could see rating downgrade if spending cap breached - CS * Mexican economic growth decelerates in August * Turkish lira recoups losses By Susan Mathew Oct 25 (Reuters) - Latin American currencies firmed on Monday, with Brazil's real lifting off six-month lows, as rallying commodity prices kept sentiment buoyed in the resource-rich region. Consumer confidence rising in Brazil for the first time in two-months further bolstered Brazil's currency which rose 0.6% after losing more than 3% last week, weighed on by political ructions and fiscal worries. Hawkish calls during a central bank meeting on Wednesday have risen on increasing fears of the government breaching its spending limit and fanning inflation. One of the most aggressive central banks worldwide, another 100 basis points hike to 7.25% is expected. The rate has already been raised by 425 basis points so far this year. "The higher government expenditures are expected to worsen the dynamics of the primary deficit, while higher nominal and real interest rates are likely to increase interest payments," said Credit Suisse analysts Solange Srour and Lucas Vilela. "As a result, stabilization of the gross debt-to-GDP ratio in the medium term has become more difficult... In addition, the country could suffer a downgrade in its sovereign debt rating as the spending ceiling was highlighted by credit rating agencies as an important fiscal anchor." Oil firm Petrobras and iron ore miner Vale rose 3.7% and 1.0%, respectively, and were the biggest boosts on Sao Paulo's Bovespa index which rose 1.5% to move away from 11-month lows. Crude and copper prices jumped on tight supply, while iron ore prices recovered after a sell-off. Oil exporter Colombia's peso rose 0.2%, while gains in Mexico's peso was limited by data showing the country's economic growth decelerated in August. The world's top copper producer Chile's currency rose 0.7% to lead gains in Latam. Stocks in Mexico broke a five-session losing run to gain 0.2%, while Chile's IPSA extended gains to a fourth straight session. Broader EM peers had a choppy session earlier in the day after rising COVID-19 cases in China further stoked fears about slowing growth in the world's second largest economy. Turkey's lira recouped losses, which had sent it to all-time lows. State-run Anadolu news agency reported that President Tayyip Erdogan "welcomed" a statement by Western embassies that they abide by a diplomatic convention not to interfere in a host country's internal affairs after he called for the expulsion of 10 ambassadors. In Argentina, the informal peso rate had weakened 2.05% to 195 per dollar on Friday as inflation soars and policy uncertainty mounts ahead of November congressional elections. Key Latin American stock indexes and currencies at 1403 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1296.02 0.22 MSCI LatAm 2193.47 2.78 Brazil Bovespa 107983.84 1.53 Mexico IPC 52009.87 0.23 Chile IPSA 4138.36 1.32 Argentina MerVal - - Colombia COLCAP 1399.00 -0.05 Currencies Latest Daily % change Brazil real 5.5903 0.60 Mexico peso 20.1740 -0.04 Chile peso 809.6 0.79 Colombia peso 3760.53 0.13 Peru sol 3.966 -0.19 Argentina peso 99.4900 -0.08 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Shailesh Kuber)