* Peru rate normalization to begin in Q4 under Velarde -Citi * Chile"s peso moves away from October lows as copper prices rise * Mexican peso heads for second straight day of falls (Adds comments, updates prices throughout) By Susan Mathew and Shreyashi Sanyal Aug 10 (Reuters) - Peru"s sol lifted off all-time lows on Tuesday on continuity in central bank policies, while Chile"s peso firmed as the worker union at its Escondida mine extended talks by a day in a last-ditch effort to stave off a strike. The sol jumped as much as 2% to trade at 4.0384 after a source said central bank President Julio Velarde had agreed to stay on for an extra term, a move poised to calm markets rattled by the election of a new left-wing president. "(Velarde"s) presence ... should imply a continuation of current monetary policy and FX intervention frameworks, including the current inflation-targeting regime and consistent (currency) market intervention aiming to limit FX volatility," Citi Research strategists said. "With Velarde on board, we continue to expect policy rate normalization to begin in the fourth quarter." The Peruvian currency is down more than 11% so far this year, with almost all of that loss incurred after an early round of elections indicated a sharp swing to the left. Chile"s peso rose 0.8%, away from an October low, as copper prices rose on supply concerns amid a looming strike at the world"s largest copper mine. Miner BHP, which operates the Escondida mine, and the powerful 2,300-member workers union, extended talks by a day. As crude prices rose, exporter Colombia"s peso added 0.8%, lifting off 15-month lows. Brazil"s real was last up 0.8% in a volatile session as investors digested a welfare program and constitutional amendment regarding court-ordered payments. Even though the government sought to reassure that the new welfare program will not breach its spending cap, Citi strategists warned it could further harm the credibility of the spending cap in anchoring the perception of sustainability in fiscal policy. But gains in emerging market currencies were capped, with some even turning session gains to losses, as the dollar gained traction. Hawkish statements by some top U.S. Federal Reserve officials and upbeat U.S. jobs data last week bolstered bets that the Fed would start tapering stimulus soon. Mexico"s peso was down 0.2%, declining for a third straight session to hit a 14-day low. The central bank is widely expected to raise its benchmark interest rate at its next monetary policy meeting on Thursday. "The peso remains vulnerable, and is high beta, to broad USD strength. However slowly improving yield differentials on the back of hiking continues to underpin MXN"s attractive yield-to-volume offering," Sacha Tihanyi, head of emerging markets strategy at TD Securities wrote in a note. Most Latam stocks tracked broader EM and Wall Street higher. Latin American stock indexes and currencies at 1916 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1300.09 0.46 MSCI LatAm 2504.14 1.44 Brazil Bovespa 122471.29 -0.45 Mexico IPC 51158.21 0.51 Chile IPSA 4345.71 2.4 Argentina MerVal 67583.30 2.25 Colombia COLCAP 1234.50 0.41 Currencies Latest Daily % change Brazil real 5.2026 0.80 Mexico peso 20.0790 -0.06 Chile peso 777.9 0.82 Colombia peso 3964 0.74 Peru sol 4.0701 0.75 Argentina peso (interbank) 97.0200 -0.02 Argentina peso (parallel) 175 2.29 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by David Holmes and Grant McCool) Our Standards: The Thomson Reuters Trust Principles.