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EMERGING MARKETS-Mexican peso rises; Peru's sol set for worst week in 28 years

    * Socialism jitters hit sol
    * Brazil's real best weekly performer
    * MSCI Latam FX set for 1.7% weekly gain

    By Ambar Warrick
    April 23 (Reuters) - Mexico's peso rose on Friday on
stability in the oil market and a re-emergence of the carry
trade, while Peru's sol headed for its worst week in more than
28 years on concerns over a socialist presidency.
    The peso rose about 0.4%, hovering around three month
highs as oil prices stabilized after three days of losses.
    The currency was set for a fourth straight week of gains,
after higher-than-expected inflation data this week suggested
that the central bank would keep rates on hold for longer.
  
    Relatively higher interest rates and economic stability have
made the peso a popular destination for carry trades - a
strategy that involves borrowing a currency at a low interest
rate, and using it to invest in another currency with a higher
yield.
    Retail sales data for February also improved from January,
although the reading was likely from before a damaging new wave
of COVID-19 infections hit the country and Latin America more
broadly.
    Latam currencies retreated for the day, but were set for a
fourth straight week of gains, as continued weakness in the
dollar and Treasury yields benefited risk-driven assets. The
greenback was set for a third straight week of losses, while the
MSCI's index of Latam FX was set to add 1.7%.
 
    "With the U.S. economy quite far along on the re-opening
side, a lot may already be in the price. We expect a catch up on
reopening outside of the U.S., which should be EMFX positive,"
Citi analysts wrote in a note.
    "While a tapering announcement remains a risk, the timing is
unclear. We are tactically short USD in Latam and to a lesser
extent more positive on duration."
    Brazil's real fell 0.2% on Friday, but was the
best weekly performer across the region with a 2.2% rise, as
progress towards a 2021 budget improved sentiment.
    But Latam's largest economy has been hit the hardest in the
region by the pandemic, with investors on edge over strained
government finances.
    Peru's sol was the worst weekly performer in Latam,
down 3.2% and on course for its worst week since Oct. 1992. The
currency has lost for the past five sessions, as a series of
polls showed socialist presidential front-runner Pedro Castillo
keeping his lead over right-wing rival Keiko Fujimori.

    But the sol appeared to have stabilized, trading 0.1% higher
on Friday after Castillo assured the Andean nation he would not
nationalize companies and would honor the rule of law.

    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1353.52               0.9
                                        
 MSCI LatAm                    2424.55              0.97
                                        
 Brazil Bovespa              120721.30              1.13
                                        
 Mexico IPC                   48940.45             -0.31
                                        
 Chile IPSA                    4855.80              0.24
                                        
 Argentina MerVal                    -                 -
                                        
 Colombia COLCAP               1295.46             -0.05 Currencies             Latest     Daily % change
 Brazil real                    5.4625             -0.15
                                        
 Mexico peso                   19.8450              0.35
                                        
 Chile peso                      711.4             -0.73
                                        
 Colombia peso                 3634.38             -0.01
 Peru sol                       3.7498              0.13
                                        
 Argentina peso                93.1200             -0.04
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; Editing by Kirsten
Donovan)
  
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