* Argentine peso extends losses on wider fiscal deficit * Mexico"s peso cuts monthly gains * Brazil"s retail, apparel companies hit by new curbs (Adds economic analyst comment, updates prices) By Medha Singh Dec 22 (Reuters) - Most Latin American currencies slipped on Tuesday, undermined by the safe haven dollar"s demand on fears over a new variant of the novel coronavirus but stocks in the region recovered in a holiday shortened week. MSCI"s index of stocks in Latin America bounced back 0.3% after suffering its worst day in about two months, with benchmarks in Brazil and Colombia posting the sharpest gains. Brazil"s real dropped for the third straight day at 5.1624 per dollar as Sao Paulo state government ordered restaurants and shopping malls to stay closed for Christmas and New Year after infection rates rose by 54% in the past four weeks. Shares of Brazil"s retail and clothing companies Via Varejo , Lojas Renner, Cia Hering shed between 0.8% and 2.7% on the news. New restrictions in Brazil, Mexico and Chile to curb the spread of the virus has fueled worries of more economic pain, slowing the sharp recovery in Latin American stocks and equities in December. "Stringent restrictions and high caseloads suggest that economic activity in (Latin America) will probably get worse before it gets better," said William Jackson, economist at Capital Economics, adding that an economic boost from a vaccine may only come in the second half of 2021. The Mexican peso and the Colombian peso also slid on fears the latest restrictions will dent fuel demand. Stricter lockdowns implemented in Britain on Monday to fight a variant of the coronavirus roiled global markets in the previous session. However, Washington"s approval of an $892 billion pandemic relief package after months of inaction is helping them recover some of those losses. The Argentine peso recorded breaching its record low in the previous session after it reported a wider fiscal deficit in November. Shares in Mexican telecommunications company Axtel fell about 12%, a day after the firm announced it had scrapped a plan to sell the business as a whole and instead seek buyers for its two units individually. Latin American stock indexes and currencies: Stock indexes daily % change Latest MSCI Emerging Markets 1248.56 -0.67 MSCI LatAm 2406.66 0.29 Brazil Bovespa 116569.11 0.64 Mexico IPC 42653.73 -1.37 Chile IPSA 4190.03 0.65 Argentina MerVal 50409.29 0.497 Colombia COLCAP 1401.17 1.73 Currencies daily % change Latest Brazil real 5.1592 0.04 Mexico peso 20.1430 -1.00 Chile peso 722.4 0.48 Colombia peso 3463.17 -0.99 Peru sol 3.6117 -0.19 Argentina peso (interbank) 83.2400 -0.11 (Reporting by Medha Singh in Bengaluru; editing by Grant McCool)