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EMERGING MARKETS-Latam FX index rises for the first time this year on recovery hopes

    * Brazil inflation ends 2020 above target, highest in 4
years
    * Mexico industrial output beats expectations in November
    * Chilean peso continues to weaken on lower copper prices

    By Shreyashi Sanyal
    Jan 12 (Reuters) - A gauge for Latin American currencies
rose for the first time in 2021 on Tuesday, as hopes of recovery
were buoyed by improving economic data from Brazil and Mexico,
while a recent rally in the dollar cooled. 
    The MSCI's index for Latin American currencies
 rose 0.5%, with Mexico's peso leading the
advance. 
    The peso rose 0.6% against the dollar a day after data
showed the Mexican manufacturing sector's recovery from the
pandemic slump had slowed in November but was stronger than
forecast. 
    Mexico's currency recently came under pressure from lower
oil prices, which has also hurt crude-exporter Colombia's peso.

    Official figures from Brazil showed annual inflation ended
last year at 4.5%, comfortably above the central bank's year-end
target as food prices rose the most in nearly two decades. 
    The Brazilian real gained 0.5%, after sliding
to a two-month low against the dollar on Monday. However, a
growing consensus shows that the tides of economic growth,
interest rates and commodity prices are turning in the
currency's favor.
    "Brazil has lagged while Mexico has outperformed and
positioning has diverged, with Mexico at the highest allocation
in three years and Brazil at the lowest. Further out, Brazil
faces clear fiscal issues, yet this should not stop Brazil
performing well in early 2021," strategists at Morgan Stanley
wrote in a client note. 
    However, Morgan Stanley cut its outlook for emerging market
currencies overall to neutral from "bullish", citing higher U.S.
yields and little improvement in fundamentals.
    A recovery also ensued in emerging market currencies in
Europe on Tuesday, after steep losses last week to a rebounding
dollar, while stocks held near record highs as increased
liquidity and low lending rates boosted demand for equities.
    Emerging market assets have been under pressure in the last
week from continued dollar strength and higher yields, which are
seen as a negative.
    The Chilean peso was among the few currencies which
were lower on Tuesday, falling 0.7%, pressured by weakening
copper prices. 
    Shanghai copper fell to a one-week low, hit by demand
concerns amid new curbs to fight a resurgence of coronavirus
cases in China, the world's biggest metals consumer.

    Key Latin American stock indexes and currencies at 1344 GMT:
    
        Stock indexes                 Latest   Daily %
                                               change
 MSCI Emerging Markets                1353.04     0.25
 MSCI LatAm                           2486.05     0.65
 Brazil Bovespa                     123439.20     0.15
 Mexico IPC                              0.00        0
 Chile IPSA                           4584.94     0.71
 Argentina MerVal                        0.00        0
 Colombia COLCAP                      1453.12        0
                                                      
            Currencies                Latest   Daily %
                                               change
 Brazil real                           5.4757     0.46
 Mexico peso                          19.9613     0.49
 Chile peso                               724    -0.66
 Colombia peso                        3490.43     0.05
 Peru sol                              3.5997     0.33
 Argentina peso (interbank)           85.4600    -0.09
                                               
 Argentina peso (parallel)                155     3.87
                                               
 

 (Reporting by Shreyashi Sanyal in Bengaluru)
  
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