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EMERGING MARKETS-Brazil's real leads bounceback in Latam currencies

    * Real rises in catch-up trade
    * MSCI Latam Stocks index rises from over 1-month lows
    * Mexico's peso recovers from 2-week low

    By Ambar Warrick
    Jan 26 (Reuters) - Brazil's real led gains on Tuesday as
Latin American currencies recovered from recent losses, although
sentiment was dampened by increased COVID-19 infections and
concerns over fiscal health in the region. 
    The real rose 1.1% in catch-up trade after a long
weekend, recovering from steep losses last week sparked by
renewed concerns over fiscal spending, as well as the central
bank saying it would not hike interest rates any time soon. 
    Interest rates in Brazil will stay low despite inflation
reaching a five-year high in mid-January, reflecting the
continued economic impact of the pandemic on Latin America's
largest economy.
    Brazilian stocks rose 0.9% after four straight
sessions of losses. 
    Fuel distributor Petrobras Distribuidora SA
provided the biggest boost to the index after Wilson Ferreira
Jr., the former chief executive of state-run power firm Centrais
Eletricas Brasileiras was set to take charge of the
firm.
    The MSCI's index of Latin American currencies
 rose 0.8% from a two-week low. The index has
underperformed its broader emerging market peers
through 2020.
    The Latam equity index rose 1.9% off
more-than one-month lows. 
    Concerns over the spread of the coronavirus in major
economies, uncertainty over vaccine distribution and increased
government deficits from fiscal spending have made Latin
American assets relatively less attractive than their emerging
market peers.
    A difference in yields with broader emerging markets has
also made currencies such as the real and Mexican peso a
less desirable means for carry trades.
    "We believe a rebound in Latam equity markets would be an
important step in turning around Latam FX performance. The boost
to FX from inflows to Latam asset markets will be greater than
the drag from cross-currency trades using Latam currencies,"
Ilya Gofshteyn, senior EM macro strategist at Standard
Chartered, wrote in a note.
    Mexico's peso rose 0.6% from a two-week low. The
country has the fourth-highest death toll from the pandemic in
the world, which has weighed on demand for its assets.
    Chile's peso rose 0.5%, while Colombia's peso
added 0.3%.
    Key Latin American stock indexes and currencies:
    
                              Latest    Daily % change
 MSCI Emerging Markets         1390.03            -1.43
                                        
 MSCI LatAm                    2403.94             1.85
                                        
 Brazil Bovespa              118397.62             0.87
                                        
 Mexico IPC                          -                -
                                        
 Chile IPSA                    4509.01             0.45
                                        
 Argentina MerVal                    -                -
                                        
 Colombia COLCAP               1397.65                - Currencies             Latest    Daily % change
 Brazil real                    5.4106             1.11
                                        
 Mexico peso                   19.9925             0.56
                                        
 Chile peso                        729             0.48
                                        
 Colombia peso                 3575.43             0.29
 Peru sol                       3.6398             0.11
                                        
 Argentina peso                87.0000            -0.10
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru
Editing by Paul Simao)
  
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