EMERGING MARKETS-Latam FX slumps as risk appetite retreats

* Demand for region's debt seen containing losses

* Brazil real sheds 0.76 pct, Mexico peso 0.68 pct (Adds comments)

MEXICO CITY, April 12 (Reuters) - Brazil's real slumped by the most in three months and Mexico's peso sank on Tuesday as investors sold riskier assets after a recent rally, but the allure of the region's debt was seen containing losses.

Fears of a worsening nuclear situation in Japan, a commodities sell-off and a lackluster start to the U.S. earnings season prompted investors to book profits on the big rally in emerging market currencies.

Both Brazil's real and Mexico's peso recently hit their strongest levels since 2008, and analysts said investors would likely soon snap up the currencies to pile on fresh bets on the region's higher-yielding debt.

"This is a natural correction following a strong rally," said Diego Donadio, a currency and debt strategist at BNP Paribas in Sao Paulo. "We should be ready to restore bullish positions in the near future."

Brazil's real bid 0.76 percent weaker at 1.591 per dollar, its worst one-day slide since January 14. Mexico's peso shed 0.68 percent to 11.83 per dollar, its steepest one-day drop since March 16.

Investors sold riskier assets like stocks and emerging market currencies after Japan raised the severity rating of the accident at its earthquake-crippled nuclear power plant, even though it did not mean the situation had suddenly become more critical. [ID:nL3E7FB2TZ]

Also weighing on demand for the region's currencies, the Reuters-Jefferies CRB index <.CRB>, a global commodities benchmark, recorded its sharpest one-day decline in a month from a sell-off in oil.

Still, analysts said they did not see a shift in the fundamental outlook for commodities, which are among Latin America's top exports.

"We still see good demand from China and the U.S. recovery is on track," Donadio said. China has become one of the world's top commodities consumers.

U.S. stock indexes slid nearly 1 percent as oil prices sank and aluminum company Alcoa's leaner-than-expected revenue started the earnings season on a disappointing note.

But demand for Latin American assets should rebound as long as the United States is seen lagging the European Central Bank's move last week to start hiking interest rates, analysts said.

Investors have been borrowing funds in low-yield currencies such as the dollar to buy Latin America's higher-yielding debt.

"There is ample liquidity and ample risk appetite, today notwithstanding," said Win Thin, head of emerging markets strategy at Brown Brothers Harriman in New York. "The conditions that fed the rally (in emerging currencies) have not changed."

Chile's peso lost 0.36 percent to 473.70 per dollar, hurt by the drop in prices for copper, its main export.

However, an expected 50-basis-point central bank interest rate hike later on Tuesday is seen providing support for the Chilean currency. (Editing by Dan Grebler)