* Banxico holds rates in split decision * LatAm stocks, currencies near March highs * Chilean peso jumps as copper prices nears 8-year high (Adds comment, details; updates prices) By Medha Singh Dec 17 (Reuters) - The Mexican peso climbed on Thursday after the central bank kept its benchmark interest rate on hold in a split decision, with other currencies and stocks in the region supported by increased risk appetite on optimism over fresh U.S. stimulus. The peso firmed 0.5% higher at 19.7809 per dollar as Bank of Mexico said the rates "pause" provides the necessary room to confirm that the trajectory of inflation converges to the target. At its last monetary policy meeting, the central bank unexpectedly held borrowing costs steady for the first time in nearly 1-1/2 years, citing the need for a pause to weigh inflationary pressures. "Banxico is a conservative central bank that takes its time in changing its views," Citi"s Dirk Willer said. "It would be unusual to resume the easing cycle after calling for a pause, after only one meeting." The peso of Latin America"s second-largest economy rose for the third day after lawmakers agreed to overhaul a new central bank bill that shook confidence in the financial system, with critics warning it could force the bank to absorb laundered drug money. The Chilean peso jumped to a 14-month high as prices for the country"s main export copper surged inched toward their highest in nearly eight years on falling stockpiles. MSCIs index of Latin American currencies and stocks hovered near their early March highs as the dollar tumbled to its lowest in over two years. Top U.S. Republicans and Democrats were closer than ever to producing a fresh round of fiscal aid to salve the heavy human and economic toll of the coronavirus pandemic. Even after rallying sharply over the past month, driven by bets on a vaccine-led recovery in the global economy, the MSCI LatAm stocks and currency indexes are set to end 2020 lower. JPMorgan cross asset analyst John Normand expects the MSCI LatAm equity index to rise to target 2,600 points in 2021, a nearly 6% upside from Wednesday"s close. Among currencies, Normand is "overweight" on Brazil, "neutral" on Mexico and Chile and "underweight" on Peru, Colombia and Argentina. Mexico"s benchmark hovered near its highest level since February on a boost from financial group Banorte and retailer Walmex while those in Brazil blimbed Key Latin American stock indexes and currencies: Stock indexes daily % change Latest MSCI Emerging Markets 1271.85 0.64 MSCI LatAm 2483.73 1.61 Brazil Bovespa 118093.92 0.2 Mexico IPC 44422.33 1.44 Chile IPSA 4200.52 2.18 Argentina MerVal 53192.49 -0.025 Colombia COLCAP 1435.32 0.97 Currencies daily % change Latest Brazil real 5.0754 0.64 Mexico peso 19.7870 0.19 Chile peso 721.6 1.69 Colombia peso 3411.85 0.18 Peru sol 3.587 -0.01 Argentina peso (interbank) 82.7100 -0.10 (Reporting by Medha Singh in Bengaluru; Editing by Andrea Ricci