(Updates prices with Brazil close; adds South Africa, Venezuela, Argentina markets)
By Asher Levine and Sujata Rao
SAO PAULO/LONDON, Feb 10 (Reuters) - Latin American stocks and currencies weakened on Monday as traders corrected an overdone rally, though volumes were light ahead of Janet Yellen's first congressional testimony as the Federal Reserve's new chair.
Brazil's real ended a four-day advance against the dollar, losing 1.13 percent and erasing the previous two sessions' gains. The Chilean and Mexican pesos also weakened modestly.
Investors remained cautious before Yellen's testimony on Tuesday, when they will look for clues on the future of the Fed's monetary stimulus program, traders said.
MSCI's emerging equity index lost 0.25 percent while its Latin America index dropped the most in a week.
Tepid U.S. jobs data on Friday helped support emerging markets, however, by reducing expectations that the Fed might speed up the tapering of its stimulus program.
"The market read the U.S. payroll numbers on Friday as weak and expected the Fed to be more cautious with any tapering," said Gustavo Mendonca, an economist with Saga Capital in Rio de Janeiro. "We've had a bit of euphoria and today's move is a normal correction."
Elsewhere in Latin America, Argentina's peso extended its rally as local lenders continued to sell dollars following a central bank rule change last week. The rule limits the net foreign currency position of the nation's banks.
Venezuela, which also attempts to preserve foreign reserves through capital controls, will set up a new parallel foreign currency exchange platform based on bond swaps to complement two existing mechanisms for dollar sales, the government said over the weekend. The move drove the price of dollar-denominated Venezuela global bonds higher.
In Europe, the Hungarian forint dropped 1.23 percent against the dollar, reflecting nervousness before the central bank's meeting next week and the publication of data later this week that could show a fall in inflation to record lows and possibly into negative territory.
The day's outperformer was Ukraine's hryvnia, which rose as much as 1.5 percent to an 11-day high after the imposition of capital curbs which slapped restrictions on some types of foreign currency purchases.
The move has stabilised the currency, boosting it almost 5 percent from 4-1/2-year lows hit last Wednesday.
The central bank offered to buy dollars at 8.49 hryvnia per dollar, compared with 8.54 on Friday.
Ulrich Leuchtmann, a currency strategist at Commerzbank in Frankfurt, said the currency would enjoy only a short-term gain from the capital controls.
"It leads to stabilisation but it is something that will hurt the hryvnia in the medium- to long run, making it much more difficult to attract foreign capital in the future."
Fitch cut Ukraine's rating by two notches on Friday to CCC from B- and kept the outlook at negative, citing rising political instability.
Poland's zloty snapped a five-day rally against the dollar. Central bank policymaker Andrzej Rzonca told Reuters he expects the economy to grow at a nearly 4 percent rate and sees no reason to extend the bank's forward guidance on leaving interest rates unchanged at least until the end of June.
Meanwhile, South Africa's rand weakened for a second straight session as investors eyed additional political risk stemming from strikes in the platinum sector and often-violent protests against poor services seen in some cities.
Editing by Pravin Char, Dan Grebler and Meredith Mazzilli