By Ragini Mathur and Purvi Agarwal

July 1 (Reuters) - Most Latin American currencies and stocks gained on Tuesday as concerns over U.S. President Donald Trump's tax reform legislation weighed on the dollar, while investors monitored trade negotiations with the U.S.

The dollar index =USD was trading near its March 2022 levels as Trump's sweeping tax-cut and spending bill, expected to add $3.3 trillion to the country's already high debt, stoked worries.

It pared earlier declines after a U.S. jobs reading.

Investors were also closely watching for any progress on the global trade front, as Trump's July 9 tariff deadline loomed. A report said India could finalize a deal as soon as this week, whereas talks with Japan took a turn with Trump warning of higher tariffs.

"The three-month window was exceptionally tight for negotiating trade deals...some lighter version of a trade deal could be enough to stop the president from reverting to Liberation Day levels", said Brad Bechtel, global head of FX at Jefferies.

"The market is heavily discounting Trump's willingness to go back to the April 2 levels, but it is unlikely to slow down the dollar's grind lower."

Latin American currencies were among the beneficiaries of the moves in the greenback, with the Chilean peso CLP= gaining 0.9% as copper prices hit a three-month high on the day. MET/L

Chile's economic activity rose 3.2% in May when compared to a year earlier, but still landed below market forecasts, data revealed.

Mexico's currency MXN= was up 0.2%. Colombia's peso COP= also edged 0.8% higher, helped by oil prices.

Brazil's real BRL= was marginally lower, while heavyweight Brazilian stocks .BVSP were up 0.2%. Shares of Embraer EMBR3.SA gained 5% to hit an intraday record high after Airline SAS agreed to buy aircraft worth around $4 billion.

The executive secretary of the Brazil's finance ministry acknowledged concern over the economy's debt trajectory, but said the government needs time to implement a gradual fiscal adjustment.

The Brazilian government decided to challenge the Congress' decision to overturn a tax hike on some financial transactions.

MSCI's index for Latin American currencies .MILA00000CUS was up 0.5%, trading at its highest since 2009. The stocks gauge .MILA00000PUS gained 0.6%.

Colombian stocks .COLCAP were 0.8% higher, while those in Argentina .MERV were up 0.9%. Mexico's stock index .MXX was up 0.2%.

EM assets have been a subject of investor interest this year as mounting economic problems in the U.S. pushed them to diversify and find value in depressed EM assets.

BofA Global Research observed that EM flows were better than they seemed, and would continue to improve. EM growth is holding up better than developed markets, and the dollar weakness was the major driver, it said.

Elsewhere in EMs, South African manufacturing sentiment showed signs of improvement in June, reaching its second-highest level this year though output is still weak, PMI data showed.

South Africa's rand ZAR= advanced 0.8%.

Key Latin American stock indexes and currencies:

(Reporting by Ragini Mathur in Bengaluru; Editing by Andrea Ricci)

((Ragini.Mathur@thomsonreuters.com;))