* Real falls as central bank seen keeping rates unchanged * FX market volatility rises on U.S. election uncertainty * Latam stocks index set for worst day since late April (Updates prices throughout; adds comments, bullets) By Shreyashi Sanyal Oct 28 (Reuters) - Brazil"s real touched a five-month low on Wednesday on expectations the central bank will leave its policy rate unchanged, while other Latin American currencies fell on uncertainty about the outcome of U.S. elections. The real tumbled 1.2% to fall for the fourth straight day as Brazil"s central bank was seen leaving its benchmark Selic rate at a record low of 2.0% at 2100 GMT. "The extension of the budget deficit in an effort to fight the effects of the pandemic is limiting the central bank"s scope to cut rates further," said Melanie Fischinger, FX and emerging markets analyst at Commerzbank. Brazil"s currency is among the worst performing emerging market units this year, falling 30%, as fears remained about the government overshooting its spending ceiling to fund a new fiscal package. "It is looking increasingly likely that the Brazilian government will violate its constitutional spending cap, or at least the spirit of it," said Thomas Mathews, markets economist at Capital Economics. "Abandoning the cap would see further depreciation of the real against the U.S. dollar, and perhaps an increase in Brazilian government bond yields." Most emerging market currencies weakened against the dollar as traders hedged against the possibility of a Democratic sweep in Tuesday"s U.S. elections. Gauges measuring expected swings in foreign exchange markets rose, with one-week contracts that cover the vote reaching their highest levels in nearly seven months. Surging novel coronavirus cases also kept risk sentiment at bay, while a 5% fall in oil prices pushed currencies of crude-exporters including Mexico and Colombia lower. The Mexican peso tumbled more than 0.9%, while Colombia"s peso slipped 0.5%. Chile"s peso bucked an eight-day winning streak to fall 0.1%, with local investors focusing on the country"s path to reframe its constitution. Argentina auctioned a dollar-linked bond and other debt for a total of about $3.18 billion on Tuesday, the economy ministry said, as the government looks to ease pressure on the battered peso currency. The country"s peso currency was flat. The MSCI"s index for Latin American stocks tumbled 4.5%, on track for its worst one-day percentage decline since late April. Sao Paulo stocks tumbled 3.5%, with heavyweight miner Vale falling 2%. Santiago stocks dropped 1.8%, weighed by a 2% decline in shares of Banco Santander-Chile after it expected to show a fall in quarterly revenue. Latin American stock indexes and currencies at 1915 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1120.34 -1.2 MSCI LatAm 1841.97 -4.52 Brazil Bovespa 96080.05 -3.54 Mexico IPC 37444.13 -1.47 Chile IPSA 3630.24 -1.81 Argentina MerVal 44391.44 -4.959 Colombia COLCAP 1130.56 -2.75 Currencies Latest Daily % change Brazil real 5.7483 -1.16 Mexico peso 21.2051 -0.83 Chile peso 773.7 -0.12 Colombia peso 3828.5 -0.55 Peru sol 3.6117 -0.14 Argentina peso (interbank) 78.3000 0.01 Argentina peso (parallel) 174 4.02 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum and Grant McCool)