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EMERGING MARKETS-Brazil markets rise as Batista plea deal threatened

SAO PAULO, Sept 5 (Reuters) - Brazil's stocks and currency rose on Tuesday after the country's top prosecutor threatened to partially revoke a plea deal that has supported corruption charges against President Michel Temer. Traders said that could allow the government to focus on its market-friendly reform agenda. Prosecutor General Rodrigo Janot said that billionaire meat tycoon Joesley Batista and a fellow state's witness seemed to have inadvertently recorded a four-hour conversation discussing crimes not covered in their plea bargain. Traders said the news drew fresh scrutiny to the accord and could delay or weaken new charges that Janot was expected to bring against Temer in coming weeks. "This should bolster optimism among government allies in Congress toward a potential approval of pension reform this year still," traders at Correparti brokerage wrote in a client note. The Brazilian real strengthened as much as 0.8 percent to a one-month high. The cost of insuring against a Brazilian sovereign default for 5 years fell to the lowest in almost three years. The country's benchmark Bovespa stock index briefly breached the 73,000 milestone for the first time since 2008, lifted by blue-chips such as state-controlled oil company Petróleo Brasileiro SA, state lender Banco do Brasil SA and miner Vale SA. Shares of JBS SA, the meatpacker owned by the Batista brothers, slumped as much as 10 percent, their biggest daily decline in 14 weeks. Other Latin American currencies also traded higher after an influential Federal Reserve policymaker said the U.S. central bank should be cautious about raising interest rates until it is confident that inflation will rebound toward its 2 percent target. A recent string of weaker-than-expected U.S. economic figures has cast doubt on the Fed's plan to hike rates a third time this year, fostering demand for high-yielding emerging market assets.

Key Latin American stock indexes and currencies at 1500 GMT:

Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1086.60 0.3 25.64 MSCI LatAm 2918.90 0.61 23.95 Brazil Bovespa 72431.71 0.42 20.26 Mexico S&P/BVM IPC 50619.26 -0.41 10.90 Chile IPSA 5141.94 -0.12 23.86 Chile IGPA 25705.15 -0.06 23.97 Argentina MerVal 23890.12 0.77 41.21 Colombia IGBC 11248.02 0.1 11.06 Venezuela IBC 264814.53 0.08 735.24 Currencies daily % YTD %

change change Latest

Brazil real 3.1184 0.58 4.19 Mexico peso 17.7900 0.48 16.60 Chile peso 620.45 0.60 8.10 Colombia peso 2917.7 0.39 2.87 Peru sol 3.235 0.06 5.53 Argentina peso (interbank) 17.2650 0.09 -8.05 Argentina peso (parallel) 18.04 0.33 -6.76

(Reporting by Bruno Federowski; Editing by Dan Grebler)