* Chile cenbank hikes key rate to 1.5% * Mexican cenbank raises GDP forecast * Brazil GDP contracts in June quarter * El Salvador Congress backs fund for bitcoin ahead of adoption (Adds market details, updates prices) By Susan Mathew and Ambar Warrick Sept 1 (Reuters) - Chile"s peso rose as much at 1.6% to hit a one-month high on Wednesday after the central bank doubled the key interest rate overnight, while other Latin American currencies also firmed as the dollar languished near four-week lows. As a rapid COVID-19 vaccination program helps the world"s top copper producer resume economic activity and inflation ticks upward, Chile"s central bank raised the benchmark rate to 1.5% from 0.75%, more than a 25 basis-point hike forecast in a Reuters poll. On Wednesday, the bank revised upwards its prediction for 2021 GDP growth to between 10.5% and 11.5% from a previous estimate of 8.5% to 9.5%. Data showed economic activity rose 18.1% in July. "The hawkish surprise should support CLP in the near term," Citi strategists said in a note, but added they stayed on the sidelines pending a pension withdrawal vote and upcoming elections. The hike comes on the heels of hawkish moves across several emerging markets, as inflation heats up in the aftermath of the pandemic. Brazil and Mexico had both recently moved rates upwards. State-owned Codelco, the world"s largest copper producer, said it has reached an early collective bargaining agreement with the five unions representing workers at its key El Teniente mine, easing some worries about Chilean copper supply. Mexico"s peso hit a two-week peak, up 0.4% after the central bank raised its 2021 economic growth forecast to 6.2% from 6% previously. Inflation is seen at 5.7% in the final quarter, up from a prior prediction of 4.8%. After some initial uncertainty, the monetary authority said on Tuesday that the International Monetary Fund"s special drawing rights may be used by the federal government to meet its foreign currency obligations. Mexican stocks tumbled nearly 2% from record highs. Colombia"s peso hit a two-month high, extending gains to a fourth straight session as rising inflation expectations pointed to a likely interest rate hike. Brazil"s real was flat as data showed GDP contracted by 0.1% in the June quarter as the new wave of the coronavirus pandemic hit demand. The central bank warned markets to revise 2021 GDP expectations lower after the data. But the central bank chief said he sees higher inflows strengthening the currency, while focus also turned to a proposed tax reform. In El Salvador, the Congress on Tuesday approved a law to create a $150 million fund to facilitate conversions from bitcoin to U.S. dollars ahead of the Central American country"s planned adoption of the cryptocurrency as legal tender next week. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1312.30 0.28 MSCI LatAm 2496.18 -0.74 Brazil Bovespa 119876.34 0.92 Mexico IPC 52281.77 -1.92 Chile IPSA 4473.91 -0.39 Argentina MerVal 75806.78 -0.844 Colombia COLCAP 1326.24 0.48 Currencies Latest Daily % change Brazil real 5.1693 0.05 Mexico peso 19.9773 0.43 Chile peso 770.7 0.25 Colombia peso 3756.1 0.28 Peru sol 4.079 -0.06 Argentina peso 97.7800 -0.03 (interbank) (Reporting by Susan Mathew and Ambar Warrick in Bengaluru Editing by Emelia Sithole-Matarise and Matthew Lewis) Our Standards: The Thomson Reuters Trust Principles.