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EMERGING MARKETS-EM FX index hits record high, Chile's peso outperforms

    * Chilean economy expands in November
    * Mexican, Chilean stocks rise  
    * MSCI EM FX index hits all-time high

 (Updates prices throughout, adds comments)
    By Ambar Warrick and Shreyashi Sanyal
    Jan 4 (Reuters) - Chile's peso outpaced its peers on Monday
after economic activity was seen expanding in November, while a
gauge for emerging market currencies touched a record high,
marking a strong start to 2021 on optimism over an economic
recovery.
    The MSCI's index for emerging market currencies
 rose 0.4%, hitting an all-time high, while the
Chilean peso jumped 1% to a 17-month high after Chile's
central bank said economic activity expanded in November for the
first time since the coronavirus arrived in the South American
nation.
    A surge in the prices of copper, the country's top export,
made Chile's peso the only Latin American currency to gain in
2020. Copper prices are also considered a barometer of economic
sentiment, given the red metal's importance in industrial
activity. 
    For the day, broader Latin American currencies rose tracking
weakness in the U.S. dollar and signs of economic expansion in
China, a top trade destination for most of Latin America.
    "Outlook for the USD remains bearish... the combination of a
collapsed term premium, vaccine implementation and reflation
tactics are fairly dominant forces," Mazen Issa, senior FX
strategist at TD Securities, wrote in a note.
    Latin American currencies were also seen as primed for more
upside after severely underperforming their broader emerging
market peers last year.
    Brazil's real, which was one of the worst
performing emerging market currencies last year, fell 1.5% to
the dollar.
    Data showed the pace of expansion in Brazil's manufacturing
sector decelerated in December to its slowest since July. But
the reading was still in expansion territory, indicating that an
economic recovery in Latin America's largest economy was still
ongoing.
    Currencies of oil exporters Mexico and Colombia
 rose, tracking recent strength in the crude market, as
markets bet on a recovery in demand and output cuts from OPEC.

    Regional stocks also rose for the day, after underperforming
their emerging market peers in 2020. Brazil's Bovespa index
 added about 0.5%, while Chilean stocks rose
1.9%.
    Accommodative monetary policy and increased liquidity
measures are expected to keep investors seeking yields in
equities through the mid-term. 
    Key Latin American stock indexes and currencies:
    
 
        Stock indexes                 Latest   Daily %
                                               change
 MSCI Emerging Markets                1302.20     0.81
 MSCI LatAm                           2440.33    -0.47
 Brazil Bovespa                     119024.69     0.01
 Mexico IPC                          44851.73     1.78
 Chile IPSA                           4257.19     1.91
 Argentina MerVal                    50509.57     -1.4
 Colombia COLCAP                      1415.21    -1.58
                                                      
            Currencies                Latest   Daily %
                                               change
 Brazil real                           5.2673    -1.46
 Mexico peso                          19.8970    -0.11
 Chile peso                             704.2     0.92
 Colombia peso                         3447.5    -0.96
 Peru sol                               3.628    -0.28
 Argentina peso (interbank)           84.6900    -0.64
                                               
 Argentina peso (parallel)                161     3.11
                                               
 
 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru
Editing by Alistair Bell and Sonya Hepinstall)
  
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