* Mexican peso falls as much as 1.3% * Brazil holiday keeps trading volumes low * Latam stocks lag EM peers (Updates prices) By Ambar Warrick and Susan Mathew Jan 25 (Reuters) - Latin American currencies weakened against the dollar on Monday as a spike in regional COVID-19 cases hurt appetite for risk-driven assets, with the focus turning to Mexico after President Andres Manuel Lopez Obrador tested positive for the virus. Mexico"s peso dropped as much as 1.3%, extending losses to a third straight session, after the news on Sunday, which came after the country"s worst weekly toll from the pandemic. Data showed Mexico"s economy grew 0.9% in November from October, signaling some strength. Analysts forecast a sustained recovery this year. "Following the record-breaking 18.0% year-on-year contraction in 1H2020, the economy recovered a significant part of the losses in 2H2020. The recovery is expected to continue in 2021," Goldman Sachs analysts wrote in a note. Along with the dollar gaining momentum, sluggish crude markets weighed on commodity-reliant currencies, with Colombia"s peso dropping up to 2.2% to a near two-month low. Concerns over fiscal spending and mismanagement of the pandemic have sullied the outlook for Latam currencies this year, with most units trading negative so far. But strategists at JPMorgan cited scope for a moderate rally in emerging market currencies, adding they remained overweight on Latam via the Mexican and Colombian pesos. "There is some cyclical juice still left in the EM trade as global growth improves and U.S. real yields remain low." Chile"s peso fell about 0.6%, as prices of the country"s largest export, copper, fell. A poll last week saw traders positioning for record-low interest rates in the country through this year. Among stocks, those in Chile and Mexico traded steady to higher, while Argentine shares hit an over two-month low. Colombia"s main index extended losses to a third day. Alejo Czerwonko, UBS" chief investment officer for emerging markets Americas, upgraded EM equities to the most preferred investments for portfolios, saying the asset class stands to benefit from the expected global economic recovery, higher commodity prices, and steady depreciation of the U.S. dollar. Brazilian markets were closed for a holiday. Key Latin American stock indexes and currencies at 1908 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1409.40 1.19 MSCI LatAm 2362.79 -0.22 Mexico IPC 45104.98 0.94 Chile IPSA 4489.43 0.19 Argentina MerVal 47606.90 -1.783 Colombia COLCAP 1400.51 -1.3 Currencies Latest Daily % change Mexico peso 20.1180 -0.77 Chile peso 732.5 -0.61 Colombia peso 3585.88 -1.68 Peru sol 3.6438 -0.27 Argentina peso 86.9000 -0.38 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Andrea Ricci and Richard Chang)