RIO DE JANEIRO, July 23 (Reuters) - Yields paid on Brazil's interest-rate contracts mostly fell on Tuesday as weak economic data and declining inflation raised questions about the length of the monetary tightening cycle, while the real rose after the country reported a smaller-than-expected current account deficit. Reports that China is looking to increase investment in railway projects supported emerging market currencies in general, and especially those of metal exporters such as Chile. * Brazil's yield curve flattened as long-dated interest rates dropped after a weekly price index showed deflation and a consumer confidence index fell to its lower level since May 2009. The data fueled speculation that the central bank may give up on additional interest-rate hikes next year. * Brazil's short-dated interest rates were steady, however, as investors still bet that policymakers will raise the base Selic rate in August by at least another half a percentage point, to 9.0 percent. * Brazil's real gained 0.4 percent after the country posted a current account gap of $3.6 billion in June, below an expected deficit of $4.8 billion. Higher-than-expected foreign direct investment boosted the result, suggesting a recovery in dollar inflows. * The Mexican peso gained 0.1 percent to 12.4915 per dollar, slightly stronger than its 100-day simple moving average, as investors remained cautious ahead of a heavy flow of corporate earnings in the United States, Mexico's main trading partner. * The Chilean peso closed 0.2 percent stronger as hopes that China will act to support its economic growth bolstered prices of copper, Chile's main export product. * The Argentine peso jumped 3.6 percent to 8.54 per dollar on the parallel market as trading resumed after a three-day halt resulting from government pressure to curb dollar outflows. The Argentine government tolerates the parallel currency market as long as its exchange rate is not too far apart from the official rate, which closed on Tuesday at 5.46 per dollar. Latin American FX prices at 2140 GMT: Currencies daily % YTD % change change Latest Brazil real 2.2127 0.58 -7.80 Mexico peso 12.4915 0.13 2.98 Chile peso 502.7000 0.20 -4.77 Colombia peso 1889.4000 -0.37 -6.53 Peru sol 2.7780 0.07 -8.17 Argentina peso 5.4600 0.05 -10.03 Argentina peso 8.5400 3.63 -20.61
