By Purvi Agarwal

May 25 (Reuters) - Most Latin American currencies appreciated against the dollar on Monday, while stocks climbed as investors welcomed signs of progress on a U.S.-Iran peace deal, which weakened oil prices.

MSCI's index tracking Latin American currencies .MILA00000CUS gained 0.5%, while the stocks equivalent .MILA00000PUS was up 0.8%.

Trading volumes are expected to be thin as markets in the U.S. were closed for the Memorial Day holiday.

U.S. Secretary of State Marco Rubio told reporters that the U.S. would give diplomacy every chance to succeed before considering whether to deal with Iran in "another way," while President Donald Trump said talks were going nicely.

Oil prices plunged 5% to two-week lows. Elevated prices have brought inflation worries to the forefront and prompted investors to rethink prospects for interest rate cuts and global economic growth.

"For now, markets appear willing to reward incremental diplomatic progress, though the broader macro outlook remains highly sensitive to any indication talks begin to stall or geopolitical tensions re-escalate," said analysts at LMAX Group.

South African assets soared on Monday with the rand ZAR= appreciating 1% against the U.S. dollar, at its highest level in over two weeks.

Equities .JTOPI in the gold-exporting nation surged 2.6%, partly aided by a 1% jump in gold prices.

Credit rating agency Moody's on Friday revised its outlook on South Africa to positive from stable, citing strengthening fiscal performance and progress on structural reforms.

Colombia's peso COP= appreciated 1.4% to its highest level since April 30. Local stocks .COLCAP rose 1.3%.

The latest poll indicated right-wing candidate Abelardo De La Espriella received a surge in voter support in the final week leading up to the first round of the presidential election, nearly tying with leftist Ivan Cepeda.

Prior polls showed more support for Cepeda, who was expected to continue current President Gustavo Petro's policies.

Chile's peso CLP= gained 1.1%. Stocks in the world's biggest copper exporter .SPIPSA rose 1.8% to a two-week high, tracking prices of the red metal that rose close to 1%.

Currencies in Mexico MXN= and Brazil BRL= appreciated 0.3% and 0.6%, respectively. Equities in both markets gained about 0.4% each.

Mexico is expected to start negotiations with the U.S. on the USMCA - a North American free trade agreement, which analysts expect will be the next catalyst for Mexican markets.

In Bolivia, President Rodrigo Paz said he will cut his salary by 50%, in another move to pacify widespread protests against austerity measures and the cost of living.

The president announced a reshuffle of his cabinet last week, amid the closure of bank branches and suspension of fuel supplies to areas affected by blockades and closures.

Markets in Argentina were closed for a public holiday.

The Bank of Israel lowered short-term interest rates for the third time in six months as inflation remained contained despite the war with Iran.

Key Latin American stock indexes and currencies:

Latin American market prices from Reuters
Equities	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1712.98	1.6
MSCI LatAm .MILA00000PUS	3064.76	0.77
Brazil Bovespa .BVSP	176863.51	0.37
Mexico IPC .MXX	68605.34	0.4
Chile IPSA .SPIPSA	10757.77	1.84
Argentina Merval .MERV	-	-
Colombia COLCAP .COLCAP	2110.38	1.3
Currencies	Latest	Daily % change
Brazil real BRL=	5.0089	0.56
Mexico peso MXN=	17.2567	0.25
Chile peso CLP=	891.18	1.06
Colombia peso COP=	3632.5	1.38
Peru sol PEN=	3.409	0.32
Argentina peso (interbank) ARS=RASL	-	-
Argentina peso (parallel) ARSB=	-	-