EMERGING MARKETS-Latam FX jumps on recovery hopes; Brazilian real leads advance

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

 (Updates prices throughout, adds background)
    By Shreyashi Sanyal
    Jan 12 (Reuters) - A gauge for Latin American currencies
rose for the first time in 2021 on Tuesday, with Brazil's real
leading the charge as hopes of recovery were buoyed by improving
economic data and a recent rally in the dollar cooled. 
    The MSCI's index for Latin American currencies
 rose 2.08%, on track for its best day since late
July 2020.  
    The Brazilian real gained over 3%, after
sliding to a two-month low against the dollar on Monday. 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.
    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.

    Brazil's Central Bank Monetary Policy Director Bruno Serra
said it was natural to imagine that the "extraordinary stimulus"
that the Central Bank is granting to the economy via monetary
policy will be removed from the scene in any moment. 
    Mexico's peso rose 1.1% 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
    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 0.8%, 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 1918 GMT:
         Stock indexes                 Latest   Daily %
 MSCI Emerging Markets                 1356.60     0.52
 MSCI LatAm                            2525.19     2.24
 Brazil Bovespa                      123984.39     0.59
 Mexico IPC                           46039.52    -0.77
 Chile IPSA                            4599.70     1.04
 Argentina MerVal                     51100.24     0.26
 Colombia COLCAP                       1457.77     0.32
            Currencies                 Latest   Daily %
 Brazil real                            5.3361     3.09
 Mexico peso                           19.8290     1.16
 Chile peso                              725.2    -0.83
 Colombia peso                         3474.75     0.50
 Peru sol                               3.6097     0.06
 Argentina peso (interbank)            85.4600    -0.09
 Argentina peso (parallel)                 155     2.58

 (Reporting by Shreyashi Sanyal in Bengaluru; editing by
Jonathan Oatis)