By Pranav Kashyap

Feb 17 (Reuters) - Most Latin American currencies edged lower on Tuesday as markets gradually picked up activity after a U.S. holiday, with attention focused on politics in Peru.

Trading was subdued after a U.S. holiday on Monday drained volumes, while several Asian markets and bourses in Brazil, and Argentina stayed shut. The Latin American equity index .MILA00000PUS inched 0.4% lower, while the region's currency gauge .MILA00000CUS was flat.

Peruvian equities .MXNUAMPESCPGPE fell to an over two-week low, down 1.5%, and were on course for their fourth session of declines - the longest run since November last year. The sol PEN= was flat in thin turnover. Peru's stock market, last year's standout in the region, remains up about 19% year-to-date.

Congress was set to debate a motion on Tuesday to remove President Jose Jeri, after reports surfaced of undisclosed meetings between the president and a Chinese businessman. Peru has been stuck in near-constant political turbulence, racing through seven presidents since 2016. Voters are also heading toward a national election on April 12 to choose the next president.

Argentine stocks .MERV have bucked the broader regional trend, with the Merval down about 7% year-to-date. By contrast, the Latin American equity gauge has outperformed both the S&P 500 .SPX and Europe's STOXX .STOXX so far this year, up roughly 17%. Analysts say the rally could have further room to run, aided by rotation away from richly valued U.S. tech and renewed demand for cheaper, overlooked pockets of global markets.

Brazil .BVSP has been among the year's standout performers, with investors positioning for the central bank to potentially begin easing as soon as March.

"Brazil's strong equity inflows have continued into 2026, extending the momentum from last year as investors remain attracted to valuations that still look appealing," said Dev Ashish, Latin America economist at Societe Generale.

"Resilient earnings, supportive EM sentiment, and institutional stability are sustaining flows."

Elsewhere, Romania's central bank held its benchmark rate at 6.50% as expected on Tuesday, saying the temporary impact of higher taxes and power prices argued for patience, with inflation seen returning to target in the first half of 2027.

Bucharest stocks .BETI rose 0.8%, while the leu EURRON= continued to hover at two-week lows against the euro.

Mexican .MXX and Colombian stocks .COLCAP were down 0.5% and 0.2%, while the local pesos MXN=, COP= posted marginal declines.

Key Latin American stock indexes and currencies:

(Reporting by Pranav Kashyap in Bangalore; Editing by Alexandra Hudson)

((pranav.kashyap@tr.com; +919886482111;))