(Updates with market close) By Sruthi Shankar Sept 5 (Reuters) - Latin American stocks surged to three-week highs on Thursday after the United States and China agreed to resume trade talks, raising expectations that both sides will resolve a tariff dispute that has hurt global growth. MSCI's index of Latin American stocks rose 1.6%, tracking gains in global stock markets after the world's two largest economies agreed to hold high-level talks in early October. Brazil's Bovespa index jumped 1.2%, boosted by gains in banking shares as central bank President Roberto Campos Neto said the economy should recover in the second half of year, most likely in the fourth quarter. Campos Neto also said inflation in Brazil is well-anchored over the short-, medium- and long-term horizons, giving policymakers room to reduce interest rates further. Latin American currencies that have been battered by the U.S.-China trade war largely steadied against the dollar. The real edged slightly lower after two straight days of gains. The currency, down 5.3% for the year, is among the worst-performing emerging currencies after the Argentine peso's 32% slump, and the Turkish lira's 7% fall. Brazil's Senate constitutional affairs committee on Wednesday approved a bill that would overhaul the social security system and save the federal government about 1 trillion reais ($243 billion) over the next decade. "The currency has deviated from equilibrium levels, in our view. We therefore project appreciation in the coming months as reforms advance in Congress and GDP growth accelerates," Ronaldo Patah and Alejo Czerwonko, strategists at UBS Global Wealth Management, wrote in a note. ARGENTINA CRISIS The Argentine peso edged slightly lower but traded near 56 per dollar, supported by capital controls imposed by the government of Latin America's third-largest economy earlier this week. It previously announced plans to "re-profile" some $100 billion in debt. The peso has been battered since President Mauricio Macri suffered a thumping defeat in primaries at the hands of Alberto Fernandez. Some of Argentina's largest creditors, who met informally this week, according to a Financial Times report, are said to have concluded that negotiations with Macri's government would be futile if Fernandez ultimately comes to power in October. "Any deal could be torn up by the new government, so that suggests that we're in a period of limbo until the new government comes into power,” said Edward Glossop, Latin America economist at Capital Economics. Chile's peso rose 1%, leading gains among the regional currencies after a jump in the price of copper, the country's top export. The rebound comes after the currency's drop to its lowest level since January 2016 on Tuesday after the central bank slashed interest rates by 50 basis points to the lowest in 9 years. Latin American stock indexes and currencies at 1937 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1002.76 1.23 MSCI LatAm 2651.77 1.57 Brazil Bovespa 102407.01 1.19 Mexico IPC 42712.01 0.92 Chile IPSA 4817.31 1.26 Argentina MerVal 26615.88 7.911 Colombia IGBC 12712.67 0.21 Currencies Latest Daily % change Brazil real 4.1000 -0.17 Mexico peso 19.7016 0.06 Chile peso 714.8 1.08 Colombia peso 3374.5 0.55 Peru sol 3.364 0.42 Argentina peso 56.0000 -0.56 (Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru; Editing by Dan Grebler)