* Chilean peso best regional performer * Brazil"s real lags on dismal retail sales data * EM FX will appreciate against dollar this year - economist (Updates prices) By Ambar Warrick and Susan Mathew Feb 10 (Reuters) - Chile"s peso rose on Wednesday as copper prices hit an eight-year high, with broader Latin American and emerging market currencies gaining as the dollar dipped on signs that underlying U.S. inflation remained benign. U.S. consumer prices rose moderately in January as the pandemic continued to weigh on the labor market and the services industry. The reading raised expectations that the Federal Reserve would be in no hurry to tighten policy in the near-future. This in turn pushed up sentiment, inviting plays into risk-driven assets across emerging markets. The dollar dropped after the data, while U.S. yields - a rise in which had recently pressured EM markets - also dipped. "Even if U.S. government bond yields do continue to rise, EM currencies will generally appreciate against the dollar this year, for two reasons," said Thomas Mathews, an emerging market economist at Capital Economics. "First, we doubt that interest rate differentials between EMs and the U.S. will widen by much. Second, we suspect investor appetite fiscal for risk is likely to remain strong, amid the backdrop of a rapid economic recovery and supportive monetary and policy." Chile"s peso rose 1.1% to a three-week high, extending gains into a third session as copper prices surged on expectations that large stimulus measures and accommodative policies would elevate industrial demand for the metal. Oil exporter Colombia"s peso rose 0.5% tracking higher energy prices, while Mexico"s peso firmed 0.4%. "We think that Mexico"s central bank will lower its policy rate by 25 basis points, to 4.00%, on Thursday given the renewed weakness in the economy," said Mathews. "We think that... industrial production (may have) edged down... in December. That may mark the end of the central bank"s easing cycle." Brazil"s real lagged its peers as retail sales slumped a far more-than-expected 6.1% in December, underlining the drastic impact a second wave of infections had on the economy. Brazil is among the worst hit countries by the pandemic, and has been struggling to rein in infections and roll out vaccines. The government recently confirmed it was considering more stimulus measures to offset the pandemic"s economic ructions. But these measures could possibly overstretch fiscal spending in the country and push up risk premiums on Brazil"s debt and currency. Tracking a dip on Wall Street, Latin American stocks continued to lag their broader emerging market peers, the latter of which hit a record high. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1423.97 1.05 MSCI LatAm 2402.85 0.16 Brazil Bovespa 118410.03 -0.89 Mexico IPC 44804.32 -0.48 Chile IPSA 4507.26 -0.78 Argentina MerVal 52164.04 -0.197 Colombia COLCAP 1372.79 -0.54 Currencies Latest Daily % change Brazil real 5.3845 -0.07 Mexico peso 20.0340 0.20 Chile peso 725.9 1.23 Colombia peso 3557.75 0.47 Peru sol 3.6367 0.03 Argentina peso 88.3600 -0.10 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Bernadette Baum and Marguerita Choy)