* Latam stocks set to extend rally to the 7th week * Mexico City suspends nonessential activities * Fall in copper prices drags Chile"s peso * Colombian c. bank keeps benchmark rate on hold * Strong dollar puts pressure on EM currencies (New throughout, updates prices, market activity and comments) By Medha Singh Dec 18 (Reuters) - An index of Latin American currencies paused on Friday after four straight weeks of gains as the dollar rebounded from the lowest in more than two years, and investors worried about surging coronavirus cases in the region. Leading losses in the region was the Mexican peso, down 0.6% at 19.96 versus the dollar, as Mexico City and the State of Mexico suspended nonessential activities due to surging infections and deaths. Brazil"s real weakened to 5.09 as the Latin America"s largest economy recorded over 1,000 new COVID-19 deaths for the first time in over three months. Economy Minister Paulo Guedes said the government may consider new economic measures to address the pandemic, but his remarks did little to reassure investors. The currency of the world"s top copper producer, Chile , fell after copper prices pulled back from above the $8,000 a tonne level. The decline reflected caution among some investors due to a tapering off of physical demand at high prices. The Columbian peso hovered near 14-month high at 724.70 per dollar. Colombia"s central bank board kept the benchmark interest rate at 1.75% for the third consecutive. MSCI index of Latin American currencies slid 0.5% as the U.S. dollar bounced back after a week of declines. In contrast, MSCI"s index of LatAm stocks was set to advance for the seventh straight week on optimism that COVID-19 vaccines will speed economic recovery next year as well as signs of progress in U.S. stimulus talks lifted sentiment globally. Sao Paolo shares gained 0.2% led by a 5% jump in shares of steelmaker Usiminas as it approved the resumption of blast furnace 2 operations at the Ipatinga (MG) plant, which were halted in April. "We expect equities in EM EMEA and Latin America to claw back some more of the ground that they lost this year relative to stock markets elsewhere, as some fundamental factors linked to the spread of COVID-19 fade, and a rebound in the global economy lifts investors" demand for "riskier" assets further," said Capital Economics" Oliver Allen. Key Latin American stock indexes and currencies: Stock indexes daily % change Latest MSCI Emerging Markets 1268.88 -0.32 MSCI LatAm 2479.29 -0.53 Brazil Bovespa 118553.08 0.13 Mexico IPC 44169.62 -0.35 Chile IPSA 4211.56 0.29 Argentina MerVal 53284.13 0.317 Colombia COLCAP 1442.70 -0.06 Currencies daily % change Latest Brazil real 5.0863 -0.17 Mexico peso 19.9470 -0.77 Chile peso 725.2 -0.50 Colombia peso 3417.25 -0.16 Peru sol 3.595 -0.22 Argentina peso (interbank) 82.8300 -0.13 (Reporting by Medha Singh and Shashank Nayar in Bengaluru, Editing by William Maclean)