* Market should price hiking cycle in Colombia this year - Citi * S&P raises economic growth forecast for Brazil, Mexico * $2 billion boost to health spending in Chile as COVID cases rise (Adds details, updates prices) By Susan Mathew and Ambar Warrick June 29 (Reuters) - Colombia"s currency was set for its worst session in two months on Tuesday, a day after the central bank held interest rates as expected, while Latin American currencies fell as resurgent pandemic fears sent investors to the safety of the dollar. The Colombian peso fell for the first time in four sessions, down 1.7% at 3,764.5 to the dollar, after Monday"s rally. Colombian interest rates were kept at a record low 1.75%, and the bank held an expansionary stance as the country battles a third COVID-19 wave, while anti-government protests have disrupted the movement of goods across the country. Citi noted that central bank chief Leonardo Villar"s statement that decisions are made on a month-by-month basis suggested that there was no commitment to keep low rates for an extended period. "This makes the overall tone neutral in our view, though some market participants are bound to read it as dovish given ... some were expecting either a hike or a more hawkish tone from the board," Citi said. The market should continue to price a hiking cycle this year and as early as the third quarter, it added. The bank could also possibly mirror hawkish signals from Brazil, Mexico and Chile, with inflation expected to heat up this year. Brazil"s real fell 0.2% as the dollar made healthy gains on risk aversion, with the highly infectious Delta variant of the coronavirus spurring fears of global economic disruption. In Brazil, President Jair Bolsonaro"s popularity has been hitting lows as citizens question his leadership with more than 500,000 fatalities from the virus in Brazil. Data from the Getulio Vargas Foundation, a Brazilian think tank, showed consumer prices appeared to be declining in the country, due to recent real strength and falling commodity prices. Ratings agency S&P trimmed its overall growth forecast for emerging market currencies on Monday, citing slow vaccine rollouts as the biggest risk. However, it raised Brazil"s economic growth estimate to 4.7% from 3.4% and Mexico"s to 5.8% from 4.9%. Mexican financial authorities said on Monday that crypto assets are not legal tender in Mexico and their use could invite sanctions. Chile on Monday announced a $2 billion boost to health spending to address the coronavirus pandemic. But the Chilean peso fell, tracking weakness in copper prices. Latin American stocks also retreated, as the risk-off sentiment extended to global equities. Peruvian markets were closed for a holiday. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1374.99 -0.43 MSCI LatAm 2652.04 -0.35 Brazil Bovespa 126790.53 -0.5 Mexico IPC 50348.19 -0.01 Chile IPSA 4302.64 -1.08 Argentina MerVal 63628.93 -0.814 Colombia COLCAP 1263.20 -0.6 Currencies Latest Daily % change Brazil real 4.9369 -0.20 Mexico peso 19.8070 0.07 Chile peso 736.3 -0.25 Colombia peso 3764.5 -1.71 Argentina peso 95.6900 0.00 (interbank) (Reporting by Susan Mathew and Ambar Warrick in Bengaluru; editing by Jonathan Oatis and Richard Chang) Our Standards: The Thomson Reuters Trust Principles.