* EMFX sentiment seen improving * Copper, iron ore prices surge on Chinese demand hopes * Mexican oil supply hurt by Pemex rig fire (Adds details, updates prices) By Ambar Warrick Aug 24 (Reuters) - Brazil"s real was headed for its best day in nearly five months on Tuesday after the government eased some concerns over rising debt levels, while most other Latin American currencies tracked gains in commodity prices. The real surged more than 2% after lower house speaker Arthur Lira said there was no chance of Congress breaking the constitutionally mandated spending cap. The announcement came a day after President Jair Bolsonaro approved the 2022 budget, which had raised some concerns over a large deficit target for the year. Bolsonaro also outlined more emergency spending measures, which had pushed up fiscal spending through 2020 due to the COVID-19 pandemic. Gains in the prices of iron ore and sugar, which are major exports from Brazil, also helped the real recover further from a more-than-three-month low hit last week. Iron ore prices in particular surged on Tuesday as easing worries over the COVID-19 outbreak in China helped calm nerves over a potential hit to demand. Shares of Brazilian iron ore miner Vale jumped 4.2% and were among the biggest boosts to the Bovespa stock index, which rose more than 2%. Broader emerging market currencies also extended gains, with MSCI"s index of currencies rising 0.5% after its biggest weekly drop in two months last week. But uncertainty over the timing of U.S. policy tightening persisted, ahead of the Federal Reserve"s annual Jackson Hole, Wyoming, economic symposium. Trading volumes are expected to be largely muted in anticipation of the event, which is expected to provide more clues to the Fed"s plans. In Latin America, Colombia"s peso rose 0.5% as oil prices extended a rally on expectations of a recovery in demand. "With the impact on demand fueling chatter that OPEC+"s next monthly output hike could be delayed, and China"s "Zero-Covid" strategy appearing to have quickly contained the outbreak, crude oil could once again have a solid footing to challenge the $70s again," analysts at TD Securities wrote in a note. Crude exporter Mexico"s peso also rose 0.5%, but the outlook for Mexican oil supply was clouded by a fire on a Pemex oil platform, which wiped out about a quarter of Mexico"s overall crude output. Chile"s peso rose 0.3%, tracking gains in copper prices as investors bet on improving demand for the red metal this year, particularly in major importer China. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1270.59 2.67 MSCI LatAm 2464.19 3.4 Brazil Bovespa 120425.69 2.51 Mexico IPC 52301.73 0.47 Chile IPSA 4354.65 -0.87 Argentina MerVal 70820.95 2.564 Colombia COLCAP 1332.81 -0.13 Currencies Latest Daily % change Brazil real 5.2516 2.46 Mexico peso 20.2008 0.50 Chile peso 781.3 0.30 Colombia peso 3860.96 0.49 Peru sol 4.0872 0.07 Argentina peso 97.4400 -0.03 (interbank) (Reporting by Ambar Warrick; Editing by Steve Orlofsky and Jonathan Oatis) Our Standards: The Thomson Reuters Trust Principles.