* U.S. consumer prices post biggest gain in nearly 12 years * Brazil"s services activity falls in March, first in 10 months * Dollar gains after four sessions of decline By Shashank Nayar May 12 (Reuters) - Most Latin American currencies fell on Wednesday as a larger-than-expected jump in U.S. inflation raised concerns over early policy tightening, with Brazil"s real set to snap a five-day winning streak on weak services data. Treasury yields rose 3 basis points to 1.65% and the dollar strengthened after U.S. consumer prices increased more than expected in April, leading many to believe inflationary pressures could spur the Federal Reserve into tightening policy earlier than signaled. A weak U.S. labor market has kept the Fed"s stance largely dovish. "We think that most EM currencies will fall a bit further over the rest of this year, in part because we forecast the 10-year US Treasury yield to rise above 2%," said Jonas Goltermann, senior markets economist at Capital Economics. "As a result, we expect yield differentials to generally shift in favor of the dollar, and pressure on the currencies of economies with weaker fiscal and external balance sheets to increase." Brazil"s real fell 0.3% after gaining for five consecutive sessions, as services activity fell in March for the first time in 10 months, meaning the sector shrank in the first quarter of the year back to below pre-pandemic levels. Furthermore, analysts believe the real"s recent appreciation to be short lived due to fiscal concerns, inflation worries and pressure from the coronavirus pandemic. "In view of the still very tense COVID situation in Brazil, it seems questionable whether the fiscal risk factors really are ring-fenced after the budget for 2021 was passed with a spending cap," analysts at Commerzbank wrote in a note. "Against the background of the slow progress with the vaccinations the debate about further corona aid measures might resurface next month, if not before, putting BRL under considerable pressure." The yield-sensitive Mexican peso fell 0.2% even as its industrial output rose 0.7% in March from February, the tenth consecutive monthly increase, official data showed. Commodity-focused currencies like the Colombian and Chilean peso eased 0.4% and 0.7%, respectively, despite a jump in oil and copper prices. The Peruvian sol rose 0.4% and was the only gainer among its Latin American peers. Opinion polls showed the gap closing between socialist front-runner Pedro Castillo and the right-wing Keiko Fujimori ahead of June 6 presidential elections. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1319.5 -0.72 MSCI LatAm 2503.08 -1.08 Brazil Bovespa 121377.7 -1.29 4 Mexico IPC 49425.05 -0.46 Chile IPSA 4530.45 -0.23 Argentina MerVal - - Colombia COLCAP 1285.43 -0.52 Currencies Latest Daily % change Brazil real 5.2283 -0.14 Mexico peso 20.0181 -0.35 Chile peso 707.1 -0.71 Colombia peso 3723.27 -0.37 Peru sol 3.6908 0.35 Argentina peso 93.98 -0.02 (interbank) (Reporting by Shashank Nayar in Bengaluru; Editing by Nick Macfie)