* Colombia"s peso hits four-week high * Brazil real set for fourth weekly decline (Adds comments, updates prices throughout) By Shreyashi Sanyal Aug 13 (Reuters) - Most Latin American currencies rose as the U.S. dollar fell on Friday, with the Peruvian sol leading gains after the country"s central bank hiked its key lending rate, while Colombia"s peso hit a four-week high. Peru"s sol firmed 0.6%, set for its first weekly rise in four weeks. The central bank delivered a 25-basis-point hike in rates to 0.5% to contain inflation. But the bank said it was still committed to an expansive monetary policy to combat the pandemic"s effects on the economy. "The decision comes after a recent increase in both observed and expected inflation, though the communique highlighted the need for an expansive policy stance and noted that real rates are still at historic lows," Citi analysts wrote in a client note. "This hike begins the normalization cycle, and we now expect at least an additional 50 bp in hikes this year." A fall in the dollar after the University of Michigan"s index of consumer sentiment hit its lowest since 2011, also helped boost Latin American currencies. Colombia"s peso extended gains to a fourth straight session. The currency jumped 2% in the last session, cheered by the government"s plan to sign road contracts worth $5.39 billion. Colombia"s poor highways and delays to modernize them are considered by analysts as one of the main factors reducing competitiveness in the country"s economy and its international trade. Brazil"s real steadied after falling earlier in the session as prices of iron ore, an export item, fell amid fiscal and political uncertainty. The real is set for its fourth straight week of losses, underperforming regional peers which were all on track to post gains on the week. Mexico"s peso rose 0.5% after falling on Thursday when the central bank hiked rates as expected, but on a split vote between monetary policy committee members. Some voted for rates to be held. Workers at Chile"s Esondida mine, the world"s biggest copper deposit, approved a revised contract, mine operator BHP said. That saw copper prices steadying after the possibility of falling supply on a likely strike raised prices for the red metal. Chile, the largest copper producer, saw its currency slip 0.2%. Among stocks, Brazil"s Bovespa stocks index rose 0.2%, lifted by heavyweight Petrobras. The index was also boosted by cosmetics company Natura & Co , owner of Avon and The Body Shop, which reported on Thursday a second-quarter profit compared with a loss a year ago. Chile"s main stocks index hit a seven-week high. Key Latin American stock indexes and currencies at 1911 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1282.18 -0.68 MSCI LatAm 2493.60 0.54 Brazil Bovespa 120906.50 0.17 Mexico IPC 51408.75 0.7 Chile IPSA 4416.00 0.94 Argentina MerVal 69254.50 -0.343 Colombia COLCAP 1265.95 0.59 Currencies Latest Daily % change Brazil real 5.2394 0.27 Mexico peso 19.8738 0.36 Chile peso 775.6 -0.34 Colombia peso 3838.12 0.44 Peru sol 4.076 0.08 Argentina peso (interbank) 97.1000 -0.02 Argentina peso (parallel) 178 0.28 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru Editing by David Holmes and Marguerita Choy) Our Standards: The Thomson Reuters Trust Principles.