* Mexico inflation rises more than expected * 25bp rate hike likely in Mexico next month - economist * Copper prices rise on earnings optimism * Mexico"s Alfa rises on strong Q2 (Updates prices) By Ambar Warrick and Susan Mathew July 22 (Reuters) - Most Latin American currencies fell on Thursday as rising COVID-19 cases spurred caution, while Mexico"s peso gained after data showing higher than-expected-inflation fueled bets of more interest rate hikes. After hitting one-month lows on Wednesday, Mexico"s peso rose 0.2%, erasing early session losses. Consumer prices rose 5.75% during the first two weeks of this month, data showed, accelerating slightly from the previous two-week period and above expectations of 5.65%. "The central bank has shown that it will act to clamp down on above-target inflation, suggesting that another 25bp rate hike, to 4.50%, is likely at its next meeting in August," said Nikhil Sanghani, an EM economist with Capital Economics. But COVID fears remained. Mexico on Wednesday posted its biggest jump in COVID-19 cases since early January. Brazil"s real shed 0.3%, as infections rose by more than 54,000 on Wednesday. More infections are likely to cause renewed lockdown measures and further hamper growth in Latam"s largest economy. But helping keep hopes of bettering economic fundamentals alive, Brazil"s government on Thursday cut its 2021 primary budget deficit forecast, on an expected jump in tax revenues on the back of stronger economic growth. Peru"s sol rose 0.2% as copper prices rose on optimism over a strong second-quarter earnings season. Optimism over corporate earnings also helped investors look past recent concerns over economic growth, with broader emerging markets staging a strong recovery. Safe-havens such as the dollar and the Japanese yen came off peaks hit this week, while the European Central Bank vowed to keep policy dovish for even longer to shore up economic growth. But Latin American assets lagged their peers due to rising COVID-19 cases in major economies. The Pan American Health Organization said the Americas is facing a pandemic of the unvaccinated, as it warned countries with low inoculation rates are seeing increases in COVID-19 and repeated a call for vaccine donations. Losses in Colombia"s peso were somewhat mitigated as ratings agency Fitch said the new tax reform bill will help stabilize the country"s strained public finances. But the agency said more fiscal action was required to bring down government debt levels. Mexico"s IPC index led gains among Latam stocks, with shares of conglomerate Alfa rising 1.8% a day after the company posted strong second-quarter earnings. Argentina"s Merval index slipped after scaling one-month highs the previous day. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1326.18 1.07 MSCI LatAm 2539.07 0.96 Brazil Bovespa 126312.81 0.3 Mexico IPC 50275.65 0.48 Chile IPSA 4267.56 -0.18 Argentina MerVal 65538.55 -0.446 Colombia COLCAP 1251.42 0.06 Currencies Latest Daily % change Brazil real 5.2079 -0.31 Mexico peso 20.1117 0.10 Chile peso 753.2 -0.17 Colombia peso 3866.2 -0.39 Peru sol 3.933 0.33 Argentina peso 96.4000 -0.03 (interbank) (Reporting by Ambar Warrick, Editing by William Maclean and Leslie Adler) Our Standards: The Thomson Reuters Trust Principles.