Chile peso firms, stocks fall on rate expectations

(Adds quote, closing peso figure, updates stocks)

SANTIAGO, July 2 (Reuters) - Chilean shares extended losses in afternoon trade on Wednesday on growing expectations of interest rate hikes, while the peso ended a nine-session decline as the dollar softened on global markets.

The Chilean peso <CLP=CL> appreciated 1.59 percent to end at 517.00/517.30 per dollar after closing at 525.20/525.70 per dollar on Tuesday.

"The peso was boosted in early trade by the dollar's retreat in global markets, especially against the euro, and by early gains in most global bourses," said one currency broker.

The Chilean currency was also helped by Central Bank President Jose De Gregorio's statement that he could not rule out further increases in the country's benchmark interest rate despite an aggressive half-percentage-point rise in June.

"The only conclusion that you can draw is that more rate hikes are on the way, and that will widen our interest rate gap with the United States and make our market more attractive to foreign investors," the broker added.

The currency has now fallen 3.71 percent for the year to date and has depreciated 16 percent since the central bank introduced an $8 billion intervention program in April to curb peso strength after the dollar fell to 430 pesos in March.

De Gregorio said the bank would take "all necessary measures" to ensure that inflation converges with the bank's 3.0 percent target within two years. In May, 12-month inflation hit nearly 9 percent on higher food and oil prices.

On the Santiago Stock Exchange, the blue-chip IPSA index .IPSA extended losses to 2.82 percent at 2,869 points while the all-market IGPA .IGPA index traded 2.26 percent lower at13,975 points.