EMERGING MARKETS-Latam FX, stocks retreat as rate jitters sap risk appetite

* Latam FX, stocks down as dollar rebounds * Brazil's industrial output falls in August, real volatile * Romania raises interest rate by 75 bps * Poland holds interest rates steady (Updates prices, adds comment) By Amruta Khandekar Oct 5 (Reuters) - Latin American currencies and stocks fell on Wednesday as hopes for less aggressive policy moves from central banks to combat inflation fizzled out, while Brazil's real pared some losses in choppy trade. Risk sentiment received a shot in the arm earlier this week as weak U.S. economic data and a smaller-than-expected interest rate hike from Australia spurred expectations that the U.S. Federal Reserve and other central banks may take a less hawkish approach. However, a sharp interest-rate hike by New Zealand and data pointing to strong labor demand in the United States dampened the optimism, pushing up the dollar and U.S. Treasury yields from recent lows. Regional currencies and stocks fell about 0.6% and 0.2% respectively after a three-day rally. "The repricing of monetary policy in the U.S. is definitely one of the main drivers (of emerging markets)," said Mauro Roca, managing director of TCW's emerging markets group. "But the macro backdrop for many emerging countries and particularly for Latam is quite decent. You have normalisation of monetary policy and higher-than-expected economic activity." The Brazilian real came off session lows and was briefly in positive territory before falling 0.1%. Data showed industrial output in Latam's largest economy fell 0.6% in August from July. The country is also gearing up for a second round of voting later in the month after former President Luiz Inacio Lula da Silva fell short of the majority needed for an outright win against far-right President Jair Bolsonaro on Sunday. As copper prices dipped, top producer Chile's peso fell 0.7% while the Peruvian sol was down 0.5%. Chile's government said gross domestic product (GDP) is expected to drop 0.5% in 2023 from the previous year, slashing its July forecast of a 0.1% contraction. Mexico's peso fell 0.3% while Colombia's peso was down 1.9%. Colombia's consumer prices rose 0.93% in September, the government's DANE statistics agency said in a report on Wednesday, taking cumulative 12-month price growth to almost four times greater than the central bank's target. Still, broader EM stocks rallied, buoyed by a jump in Hong Kong shares. Among central and eastern European currencies, the Romanian leu was up 0.1% against the euro after the country's central bank on Wednesday raised its benchmark interest rate by a greater-than-expected 75 basis points, saying the short-term inflation outlook has worsened. The Polish zloty was flat. Poland's central bank kept its main interest rate steady at 6.75% in a surprise move on Wednesday. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 910.26 1.86 MSCI LatAm 2233.77 -0.17 Brazil Bovespa 117233.74 0.86 Mexico IPC 45696.33 -0.76 Chile IPSA 5193.58 -1.05 Argentina MerVal 147454.99 1.745 Colombia COLCAP 1203.52 0.51 Currencies Latest Daily % change Brazil real 5.1730 -0.12 Mexico peso 20.0215 -0.32 Chile peso 939.2 -0.72 Colombia peso 4576.03 -1.87 Peru sol 3.9575 -0.51 Argentina peso 148.8800 -0.19 (interbank) Argentina peso 278 1.44 (parallel) (Reporting by Amruta Khandekar in Bengaluru; Editing by Andrea Ricci and Jonathan Oatis)