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EMERGING MARKETS-Mexico peso tumbles to eight-month low on NAFTA worries

MEXICO CITY, Nov 15 (Reuters) - Mexico's peso sank to an eight-month low on Wednesday, hurt by concerns that the latest round of talks to overhaul the North American Free Trade Agreement (NAFTA) would fail to make much headway in the face of tough U.S. demands. Mexico's peso was down by as much as 0.9 percent, touching its weakest level since mid-March, before closing 0.31 percent weaker. Lower level negotiators from the United States, Canada and Mexico started a fifth round of NAFTA talks in Mexico City on Wednesday, but expectations for major advances were low.

"Due to the wide distances between the sides, it is improbable that they make very substantial advances in this meeting," said Mario Castro, a strategist at Nomura in New York. "The market had gotten a little too optimistic and it is coming back to reality," he said. In the last round, in October, Washington made several proposals, including minimum U.S. content rules for automobiles, that Canada and Mexico rejected outright and that could derail hopes for an agreement. Other Latin American currencies saw more modest losses after U.S. data showed a surprise rise in retail sales last month as well as an uptick in underlying inflation, cementing expectations for an interest rate hike in December. The region's biggest market, Brazil, was closed for a local holiday. Higher U.S. interest rates could lure yield-hungry investors out of emerging market assets, which are seen as riskier. Mexico's stock market was little changed after closing at its lowest since March in the previous session. Mexican stocks have slumped after a weak batch of corporate reports on third quarter earnings. Shares of Mexican low-cost airline Volaris fell about 1.7 percent, paring back losses slightly that took shares to their lowest since late May 2015 after preliminary deal to buy 80 Airbus jets.

Latin American stock indexes at 2300 GMT:

Stock indexes Latest Daily pct YTD pct change change MSCI Emerging Markets 1,111.12 -0.64 28.86 MSCI LatAm 2,677.82 -0.47 14.4 Brazil Bovespa 70,826.59 -2.27 17.60 Mexico IPC 47,690.80 -0.38 4.49 Chile IPSA 5,273.77 -0.66 27.04 Chile IGPA 26,588.18 -0.64 28.23 Argentina MerVal 26,312.68 2.74 55.53 Colombia IGBC 10,693.68 0.25 5.58 Venezuela IBC 660.68 -0.17 -97.92

(Reporting by Michael O'Boyle; editing by Diane Craft)